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Traders,
I need some tips on options trading. I have a OEX system that produces, on
average between 3-6 OEX points per trade. So when the delta of the option
is 1, I can expect a 3-6 point move in the option.
The question I have is whether to by in-the-money or out-of-the money options.
It would seem that the percentage move of out of the money options is greater
than in the money. So an out of the money option would move from
3 to 6 or 9, instead of an in the money option that would move from
20 to 23 or 26. The precentage move of the latter is not as great.
Also it would seem that the deltas of in vs out of the money options is
different. The in or at the money options seems to approach a delta of 1
during option expiration week more quickly that the out of the money options.
Is this correct?
Right now I am waiting to trade only during option expiration week, and I
usually only buy at-the-money options. Is this an appropriate strategy given
that I can expect between 3-6 OEX points per trade?
BTW, I have Larry McMillian's book, but it offers little advice on these
questions.
Thanks
Troy
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