The January 15 2027 call options on QQQ look like this as of posting (current price 481.48):
Strike
Black-Scholes
Ask
485
64.244
77.4
500
57.796
69.83
…
…
…
675
14.308
14
680
13.693
13.5
685
13.077
12.49
…
…
…
700
11.446
10.5
…
…
…
720
9.702
8.5
So, if you were following this strategy and buying today, would you buy 485 because it has the lowest OOM strike price? Would you buy 675 because it’s the lowest strike price where the ask is lower than the theoretical Black-Sholes fair price? Would you go for 720 because it’s the cheapest available? Would you look for the out-of-money option with the largest difference between Black-Sholes and the ask?
What would be your thought process? I’m definitely hoping to hear from @lc but am interested in hearing from anybody who found this line of reasoning worth investigating and has opinions about it.
I’m trying out this strategy on Investopedia’s simulator (https://www.investopedia.com/simulator/trade/options)
The January 15 2027 call options on QQQ look like this as of posting (current price 481.48):
So, if you were following this strategy and buying today, would you buy 485 because it has the lowest OOM strike price? Would you buy 675 because it’s the lowest strike price where the ask is lower than the theoretical Black-Sholes fair price? Would you go for 720 because it’s the cheapest available? Would you look for the out-of-money option with the largest difference between Black-Sholes and the ask?
What would be your thought process? I’m definitely hoping to hear from @lc but am interested in hearing from anybody who found this line of reasoning worth investigating and has opinions about it.