Buy OTM Or ATM Options With The Outlook That It Will Eventually Become Deep ITM Options

When an options trader buys ATM or OTM options, he is paying a low premium as compared to when he is buying ITM options. However, he projects that these ATM or OTM long option positions will move into ITM territory. When that happens, the options trader can earn a profit by closing the option positions.

Deep ITM Call Option

As you can see from the above options chain, deep in the money call options have a higher premium than out of the money call options. The Deep ITM call has a bid-ask spread of 12.55 to 15.55 while the OTM call has a bid-ask spread of 0.79 to 0.87.  If an options trader has bought OTM options and it becomes deep ITM in a short span of time, with all things staying constant, the option premium will increase drastically.

Read: Execute A Long call options trading strategy Profit from price movements to the upside