Hello,
Could someone help with the following questions?
What’s the difference between 10-delta & 25-delta, is it related to the Risk reversal?
Why 10-delta & 25-delta are more common in comparison to others deltas
Thank you!
Hello,
Could someone help with the following questions?
What’s the difference between 10-delta & 25-delta, is it related to the Risk reversal?
Why 10-delta & 25-delta are more common in comparison to others deltas
Thank you!
A 10-delta option is far out of the money, while a 25-delta option is somewhat out of the money.
As an example, given these data:
Using the Black-Scholes-Merton option pricing model, a 10-delta call option will have a strike price of $55.03 while a 25-delta call option will have a strike price of $50.50. Note that in practice, they’d probably use a $55 strike call as the 10-delta call.
I don’t know why they’re the most common. Tradition, perhaps.
Thank you for your answer
Neither do I know, why 10-delta & 25-delta are most used