2007-12-10 09:12:16 · 4 answers · asked by Yardbird 5 in Business & Finance ➔ Investing
The DITM call will make money on a smaller increase in the share price than the OTM call. (This is partially due to the difference in "delta" referenced in a previous answer.)
You will pay less extrinsic value (time premium) for an option further away from the strike price. This, in turn, means the near the money option will experience more rapid time decay than the DITM option.
A decrease in implied volatility will lower the price of all options, but have less impact on an option further away from the strike price.
2007-12-10 16:06:36 · answer #1 · answered by zman492 7 · 0⤊ 0⤋
I wimped out on answering your other option question, but my answer to this one is really the same (and some witty wunderkind has beaten me to the punch).
Financial asset evaluation (on any given asset at any given moment in time) is not a science. The bottom line is that in the noise of daily trading people stick their emotions and non-mathematical "reasoning" into buy and sell orders.
"Why" for me is irrelevant. What matters is whether or not it does something "for" me at that moment in time (with all of my emotions and non-mathematical "reasoning" running my show).
2007-12-10 17:47:55 · answer #2 · answered by Anonymous · 1⤊ 1⤋
The answer is Delta. Tons of info on the web...
2007-12-10 22:35:46 · answer #3 · answered by Andy 4 · 0⤊ 1⤋
Pure pontification and resolute to be sanguine in the outcome.
2007-12-10 17:15:20 · answer #4 · answered by Anonymous · 0⤊ 2⤋