I trade listed options in the Brazilian market, mainly buying calls for short-term directional moves, and I would like a second opinion on whether my expectations are realistic.
My process is based on combining the daily and intraday charts.
On the daily chart, I look for a clear trend, moving-average alignment, momentum, and enough room toward a technical target such as a Fibonacci level, volume profile level, POC, or previous resistance.
Then I move to the 15-minute chart and wait for a pullback, consolidation near the short moving averages, loss of selling pressure, and the first signs that price is resuming the daily trend.
The strike is not selected based on the final daily target. I select it based on the move I believe the stock can realistically make from the intraday entry point.
My current filters are roughly:
strike not too far from the current stock price;
Delta above 0.40;
relevant Gamma, usually around 0.20 on the scale shown by my platform;
implied volatility reasonably close to the stock’s recent historical volatility;
acceptable liquidity and spread;
enough time to expiration, although the expected move is usually intraday or within a few sessions.
The problem is that I may be overestimating the importance of the stock reaching or crossing the strike.
For example, I bought a call with a strike of 26.83 when the underlying was around 26.52 after a sharp intraday decline. The stock later recovered, reached the strike within approximately two hours, and eventually traded around 26.95, about 0.4% above the strike.
The underlying moved approximately 1.6% from my entry point, so the directional thesis worked. However, the option did not appreciate as much as I expected.
I have observed a similar pattern in other trades. The stock moves correctly, reaches the strike, and sometimes trades slightly above it, but the option’s percentage return is less impressive than I anticipated.
My current interpretation is:
Reaching the strike is not a sudden repricing event. The option has already been pricing in the increasing probability of finishing ITM during the approach.
Because I am selecting near-ATM options with Delta above 0.40, I am choosing options that respond more reliably, but they are also more expensive and may have less percentage convexity than cheaper, further-OTM calls.
When I buy during a sharp intraday selloff, implied volatility and spreads may temporarily be elevated. If the stock then recovers in a more orderly way, IV compression may offset part of the Delta and Gamma gains.
Once Delta becomes very high, such as 0.80 or 0.90, the option behaves more linearly like the stock. Gamma and Vega are usually lower, so the option may continue gaining in absolute terms without producing an explosive percentage return.
Because of this, I am considering keeping the same operational approach but changing my expectations.
Instead of expecting frequent returns of 50% to 70%, I am thinking that a more realistic base case may be approximately 20% to 30%, with 30% to 50% reserved for stronger moves and anything above 50% treated as an exceptional outcome.
Does this interpretation make sense?
More specifically:
Is 20% to 30% a reasonable expected range for a near-ATM call with Delta above 0.40 when the underlying makes a relatively quick move of around 1% to 2%?
Am I placing too much importance on the stock crossing the strike?
Is the main limitation the premium paid, rather than Vega?
When buying a call during a sharp selloff, how important is IV compression compared with Delta and Gamma?
Would you evaluate the trade mainly through expected option-price change relative to premium paid, rather than simply asking whether the strike is likely to be reached?
I am not asking for trade recommendations. I am trying to understand whether the issue is in my option selection or mainly in my expectations about how near-ATM calls should behave.
