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I go with weekly ones miles out of the money cause I’m too poor for anything else and have a gambling problem. The pros on wsb call these FDs
Basically everything about options is priced to convince you to buy the options where you’ll lose money. Why buy the $10.00 ITM call that expires in 60 days when you could buy 10 of the the $1.00 OTM call that expires in 15? Because the OTM call is in all likelihood going to zero. There’s zero intrinsic value in the OTM call and it has work to do to achieve any intrinsic value, hence it’s cheaper. The other piece of this is that time decay is way worse when the option is trading OTM, and when you’re long options time is the enemy.
Personally I buy ATM or slightly ITM with the monthly expiration that makes sure I’ll be out of it before it has only 30 days until expiration because that’s when the time decay really ramps up.
Enthusiast
Depends. Safe answer is always near the money or ITM. However, given a long enough expiration, low theta, and high delta, sometimes I play OTM and look for a short swing.
If I grab a Jan 2021 call OTM, hold it for 2 days, and sell, theta isn't really going to be an impact. Generally these plays aren't extremely profitable unless there is a massive jump in the underlying, but you can scalp 5-10% in a good trade.
I always sell a put at a key support level and use that credit to buy a call. Both otm.
Ok, so my 400/401 - 9/18, bull debit spread is in the money. I paid 58 to enter. Optionsprofitcalculator.com says I can expect a $42 profit. have been trying to close all day w/profit set limit: $1.00 on Robinhood but still in queue. WTH?!
Subject Expert
There’s no ‘right answer’ since people have different strategies and styles. Your thesis also contributes to how to select a strike.
If you’re more tactical and in&out of positions in a few hours to a few days, then options less than 30 days make sense. Staying within a couple strikes of ATM probably make the most sense since there isn’t much time for the trade the play out. I usually do trades around earnings calls with weeklies.
If you have a longer term thesis is depends on position size and how you want to shape the position. You may want to do ATM to get faster gains because the delta is higher, but this will result in fewer contracts. If you really think the underlying could make a big move or you want a smaller position you can go further out of the money where Vega and theta are less of an issue - and you get to enjoy a growing gamma as you get closer to expiry. This is usually how I hedge, but with puts obviously.