Trading adviser Andrew Semple of derivatives dealer Andika acknowledges that if the market has experienced a major fall you need to be cautious.
Because you are paying out money such transactions are described as debit trades.The position profit potential can be estimated from a calculation known as the option delta that is derived from an options pricing model such as the Black and Scholes method.
At 4325, a 4400 index call had a delta of 0.52 which can be interpreted as suggesting that for every 100 points the market index might rally, the 4400 exercise option should gain 52 points.


A trader looking for a rally would expect to see the daily market index price move above the 50 day moving average price. If there is a trend showing new highs outpacing new lows, momentum is typically focused to the upside for the general market and a call option strategy could be rewarding.





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