Which Option To Buy: Deciding What Contract Is Best

(i) Day Trading

– Uses the underlying instrument with the highest possible delta (trade the stock, NOT the option)

(ii) Short term Trading (1 to 2 weeks)

– Can buy short term
– In-the-money option
– Large delta (respond closely to the movement of the underlying)

(iii) Intermediate term Trading

– Can use lower delta due to longer trading period
– Large moves might happen due to longer trading period
– trade at-the-money option

(iv) Long Term Trading
– use even lower delta
– at-the-money option
– LEAPS option

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