36 lines
1.4 KiB
Plaintext
36 lines
1.4 KiB
Plaintext
Chapter 25: LEAPS 389
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delta indicate that the January 90 LEAPS will move by a larger percentage than the
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January 80 and therefore would be the better buy.
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PUT DELTAS
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Many of the previous observations regarding deltas of LEAPS calls can be applied to
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LEAPS puts as well. However, Figure 25-5 changes a little when the following for
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mula is applied. Recall that the relationship between put deltas and call deltas, except
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for deeply in-the-money puts, is:
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Put delta = Call delta - 1
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This has the effect of inverting the relationships that have just been described.
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In other words, while the short-term calls didn't move as fast as the LEAPS, the
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short-term puts move Jaster than the LEAPS puts in most cases. Figure 25-6 shows
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the deltas of these options.
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The vertical axis shows the puts' delta. Notice that out-of-the-money LEAPS
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puts and short-term equity puts don't behave very differently in terms of price
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change (bottom right-hand section of figure).
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In-the-money puts (when the stock is below the striking price) move faster if
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they are shorter-term. This fact is accentuated even more when the puts are more
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deeply in-the-money. The left-hand side of the figure depicts this fact.
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FIGURE 25-6.
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Put delta comparison, 2-year LEAPS versus 3-month equity options.
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90
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80
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70 t= 3 months
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0 60
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0
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1 50
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X
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Jg 40
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Q)
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0
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30
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20
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10
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O 70 80 90 100 110 120 130
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Stock Price |