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Preliminary GDP?
First, don’t miss today’s Daily Chart Setup trade idea down lower in this newsletter.
GDP numbers are out in the premarket today — do they surprise to the upside or downside? NVDA earnings appeared to bring nothing but chop in the after-hours market, and we have PCE coming up Friday morning.
Come join me as we dive in and see what’s moving!
Plus, as always, we have stocks popping and dropping so come find out what is moving this morning as I look for stocks and do some live premarket analysis on SPX, SPY, NDX, QQQ, Russell, IWM and other stocks that are potential plays for the day.
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The Power of Deep-In-The-Money Options: How the Pros Trade Big Moves
When most traders buy options, they’re looking for a home run — a cheap contract that will explode in value if the stock makes a big move.
But professional traders play the game differently.
Instead of gambling on out-of-the-money (OTM) calls or puts, they often go deep in the money (ITM). It’s a strategy that offers better risk control, lower time decay and higher odds of success.
Why Deep ITM Options?
The key difference between deep ITM options and at-the-money (ATM) or OTM contracts is the balance between intrinsic and extrinsic value.
ATM options are almost entirely made up of time value — meaning if the stock doesn’t move quickly, the option can lose value fast. But deep ITM options have most of their value tied to the stock price itself. That means less time decay and a more direct correlation to the stock’s movement.
Take Nvidia (NVDA) as an example.
If the stock is trading at $130, an ATM call might cost $9.00 per contract, but nearly all of that is time value. If the stock doesn’t move, that premium evaporates.
On the other hand, a deep ITM call — say with a $100 strike price — might cost $30.00 a contract, but most of that cost is intrinsic value. If the stock moves up $5, that option gains almost the full $5, while an ATM contract might see little to no gain due to shifting implied volatility.
How Big Traders Reduce Risk
Another reason pros love this strategy is that it reduces the premium they pay. By going deep ITM, they avoid the inflated implied volatility that often comes with short-term speculation.
For example, when high-profile investors — think Nancy Pelosi and other politicians with significant market exposure — place large options trades, they often go deep ITM.
It’s not because they’re reckless. It’s because they’re cutting down the cost of time decay and ensuring that most of their money is actually working for them, not against them.
This approach works best when a trader has high conviction about a stock’s long-term move. It’s not for quick flips or lotto-ticket trades. But for those who know how to use it, deep ITM options can be one of the smartest ways to play a big move without getting burned by time decay or volatility spikes.
If you’ve been struggling with options losses, take a closer look at how the pros trade.
Sometimes, the best play isn’t the cheapest bet — it’s the smartest one.
Now be sure to join me live at 9:15 a.m. ET for “Morning Monster,” my market-open livestream on YouTube!
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