optimal OTM option
Lets say ABC is at 200. If I expect that ABC will be 180 by December, and I can only purchase 1 put option, what would be the most OPTIMAL put option to purchase? This is a question I've had - im trying to figure out if there is any mathematical reasoning here. I usually always purchase verticals, but I thought about this today. An explanation would be appreciated!
(1)1 Comments
Sorted by latest first Latest Oldest Best
Using Black-Scholes pricing model, a 0 put has a price of .28, 0 strike is .81, and 0, .54.
Just buying the 0 put will return, /.28 or 63%.
Buying the 0 put and selling the 0 will cost a net .27, but return , for a 206% return. This is a spread trade, a bear put spread, and also caps your potential gain. But you did ask how to maximize the gain based on the 0 target.
Terms of Use Privacy policy Contact About Cancellation policy © freshhoot.com2025 All Rights reserved.