Anyone using deltas and gammas to get the best option strike?

Question

I realize there r other Greeks- vega and rho but these two r the biggiesDeltas have helped me tremendously but has anyone used these both with best results and what r your parameters.I have also had UNBELIEVABLE sucess with Price/Volume and 2 other indicators- ONLY!!!!!!- but i have also found these 2 Greek indicators,in particular, have great predictability- usually!

Answer 1

When I want a delta-neutral spread I obviously use delta.

Most spreads I open have a negative gamma, so I have to control my gamma risk, but that is about the only way I use gamma.

Implied volatility (IV) and theta are probably the biggest determinants of the strike prices I choose most of the time. I usually try to find options where I believe IV is too high and open spreads that are short the ATM stike. I suspect that is quite different from your typical option position. I try to take advantage of vega and theta.

I agree that delta and gamma are quite predictiable as long as there is not a big change in IV. I don't quite know how I would use them to pick a strike price, but if you have found a way that works for you I suggest you stick with it. I would caution you to take some care and do not assume past performance will be an accurate predictor of future performance. Don't start increasing you position sizes too much assuming you have found a great system. I have seen too many people crash and burn by putting too much faith in a system that has worked for them in the past.

Answer 2

Delata charecteristic function is a cubic spline curve. So if the delta falls in the first inflection point we can expect the premium to rise fast at a faster rate. So if a lower strike option is available the investor has better probability of getting in the money. This is one use of delta.