Choosing Strikes and Expirations
Every options trade comes down to two decisions: which strike price, and which expiration date. Get these right and you’re set up for a trade that matches your goals. Get them wrong and you’re either collecting pennies or taking on far more risk than you planned.
This guide covers both decisions once and shows how they apply to covered calls (CCs) and cash-secured puts (CSPs).
Strike Selection
Section titled “Strike Selection”The Three Zones
Section titled “The Three Zones”Strike prices fall into three zones relative to the current stock price.
Out of the money (OTM) — The strike is above the current price (CC) or below it (CSP). The option is less likely to be exercised, so premium is lower but you have a buffer zone before anything happens.
At the money (ATM) — The strike is very close to the current price. Premium is highest here. Assignment is roughly a coin flip.
In the money (ITM) — The strike is below the current price (CC) or above it (CSP). Premium is highest but assignment is likely. ITM covered calls cap your upside immediately; ITM puts are almost certain to be assigned.
Most sellers work in the OTM to slightly-OTM range. ITM is a niche choice for specific situations.
The Question That Guides Everything
Section titled “The Question That Guides Everything”Before selling, ask yourself the one question that cuts through the noise:
- Covered calls: “Would I be happy selling my shares at this strike price?”
- Cash-secured puts: “Would I be happy buying shares at this strike price?”
If the answer is no, don’t sell that strike — no matter how attractive the premium looks.
The Delta Shortcut
Section titled “The Delta Shortcut”Delta tells you the approximate probability the option finishes in the money. For most sellers, 0.20–0.30 delta (20–30% chance of assignment) is the practical sweet spot. It’s not a rule, but it’s a useful anchor when you’re starting out.
A 0.20 delta call or put means roughly an 80% chance the option expires worthless and you keep the full premium.
Strike vs. Premium Tradeoff
Section titled “Strike vs. Premium Tradeoff”| Zone | CC Premium | CC Probability Kept | CSP Premium | CSP Probability Expires |
|---|---|---|---|---|
| Deep OTM | Low | High (~85%) | Low | High (~85%) |
| Slightly OTM | Moderate | Moderate (~70%) | Moderate | Moderate (~70%) |
| ATM | High | ~50% | High | ~50% |
There’s no free lunch here. Higher premium always comes with higher probability of assignment. Your job is to find the zone that matches what you’d actually be fine with.
Expiration Selection
Section titled “Expiration Selection”The 30–45 DTE Sweet Spot
Section titled “The 30–45 DTE Sweet Spot”Most options sellers target 30–45 days to expiration (DTE). The reason is theta — the rate at which an option loses value over time.
Theta accelerates as expiration approaches, and the 30–45 DTE window captures most of that acceleration without requiring you to hold through the wild swings of the final week. See About Time Decay for the full explanation of why the curve works this way.
Weeklies vs. Monthlies
Section titled “Weeklies vs. Monthlies”Weeklies (7 DTE or less) have fast per-day premium decay — but they require active management, more trades per year, and more transaction costs. They leave you exposed to sudden gaps with little time to adjust.
Monthlies (30–45 DTE) align with a natural planning rhythm. You set the trade, check it periodically, and either let it expire or manage it if the stock moves against you. For most people, this is the right cadence.
Weeklies aren’t wrong — but they suit traders who want to be glued to their positions. Monthlies suit investors who want premium income without the full-time commitment.
Calendar Awareness
Section titled “Calendar Awareness”Before selling any option, check three things:
- Earnings date — Stocks can move 10–20% on earnings. If earnings fall before your expiration, you’re exposed to that event. Decide deliberately whether you want that exposure, or close/avoid before earnings.
- Ex-dividend date — For covered calls, early assignment risk spikes just before the ex-date. For CSPs on dividend stocks, the dividend can act as a soft floor.
- Your own schedule — If you’re traveling or unavailable, don’t sell short-dated options that may need active management.
Putting It Together
Section titled “Putting It Together”These aren’t rigid rules — they’re starting points. Pick the profile that matches your current goals:
| Style | Strike | Expiration | Best For |
|---|---|---|---|
| Conservative | 5–10% OTM | 30–45 DTE | Steady income, high probability of keeping shares |
| Balanced | 3–5% OTM | 30–45 DTE | Higher premium, moderate assignment risk |
| Aggressive | ATM or near | 7–14 DTE | Maximum premium, requires active management |
The conservative approach means lower premium per trade but fewer surprises. The aggressive approach maximizes income but demands more attention and puts you closer to assignment on every trade.
Most people start conservative, get a feel for how assignment works, and then adjust from there.
Common Mistakes
Section titled “Common Mistakes”Chasing the highest premium. ATM options pay the most — but they also assign the most. Always ask the ownership question before you sell.
Ignoring earnings dates. This is the single most common way options sellers get blindsided. Always check the earnings calendar before selling.
Setting and forgetting the same strike and expiration every cycle. Conditions change. Volatility changes. Your stock’s price changes. Recalibrate each time rather than reflexively repeating last month’s trade.
Ignoring bid-ask spreads. Wide spreads on illiquid options eat your premium before you even enter the trade. Stick to options with open interest in the thousands and tight spreads. The midpoint of the bid-ask is your target fill price — don’t accept the bid as a given.