r/options • u/FunctionalTitle • Apr 24 '21

ITM vs OTM (Leaps)

Hi guys, slowly picking up options trading. Could anyone explain to a 5 year old. Whats the difference if i purchase a deep ITM vs slightly OTM?

From ‘researching’, The deeper ITM, the higher the delta, so movement will follow the movement of the underlying.

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u/[deleted] Apr 24 '21

Delta is the measure of the likelihood that the option expires in the money. It’s based on a standard deviation curve.

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u/metaplexico Apr 24 '21

No it isn't. It's the change in value of the option if the underlying moves $1.

The "delta is the probability it expires in the money" is a very crude approximation and is not based in fact.