Seeking Alpha

Richard Bloch

 
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  • New To Options? Consider The Deep In The Money Strategy [View article]
    "In my opinion you don't always have to go five strikes below the stock price to be considered deep in the money, but for myself I consider one to two strikes (for calls) below the share price to be considered in the money and three or more strikes below the stock price to be considered deep in the money for stocks under $15. The higher the price of your stock, the more the strikes are going to be adjusted to be considered deep in the money."

    Given that wide variance in stock prices, I would not use number of strikes at all. After all, Alcoa's strikes are nearly 10% apart considering the stock is trading near $10 and strikes are $1 apart.

    Compare that to Apple with strikes are just 1.2% apart.

    I suggest just looking at the delta. Everyone will differ on the specific level, but I'd say an option with a delta of 0.8+ qualifies as DITM. That's a consistent way to evaluate options regardless of stock price.
    Jan 31 07:54 PM | Likes Like |Link to Comment
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