Best Strike Price Strategies for Beginners in Options Trading
Introduction
If you’re just starting with options trading, selecting the right strike price can be overwhelming. Choosing incorrectly could mean missing out on profits—or worse, losing your investment. This guide will walk you through beginner-friendly strategies to select strike prices smartly and confidently.
Why Strike Price Selection Matters
Strike price directly influences your option’s cost, risk, and profit potential. A good strike price can increase your chances of success, especially when you’re still learning how options work.
Strategy 1: Stick to At-the-Money (ATM) Options
ATM options have strike prices very close to the current stock price.
Why it works for beginners:
- Balanced premium cost and profit potential
- Easy to understand break-even calculations
- High liquidity on most platforms
Example:
If Apple is trading at $180, choose a $180 strike price.
Strategy 2: Use In-the-Money (ITM) for Safer Trades
ITM options are already profitable at the time of purchase.
Best for:
- Higher win rate
- Lower risk, especially for call options
- Learning about intrinsic value and time decay
Example:
If Tesla is trading at $200, an ITM call might have a $180 strike.
Strategy 3: Avoid Deep Out-of-the-Money (OTM) Options
OTM options have lower premiums but need a big move in price to become profitable.
Why beginners should avoid it:
- Higher failure rate
- Often expire worthless
- Misleadingly cheap premiums can tempt emotional trading
Example:
Avoid a $250 strike call if the stock is at $200 and nearing expiration.
Strategy 4: Start with Longer Expiry Dates
Give your trade more time to move in your favor by choosing options with at least 30+ days to expiration.
How it helps:
- Reduces time decay impact
- More forgiving if price movement is slow
- Easier to manage as a new trader
Strategy 5: Use Strike Price to Define Your Risk
The strike price you choose should reflect your comfort with loss and expectation of price movement.
Tip: Always calculate the break-even point before placing the trade.
- Call: Strike + Premium
- Put: Strike – Premium
Summary Table
| Strategy | Benefit for Beginners |
|---|---|
| ATM Strike Selection | Balanced cost and probability |
| ITM for Safer Trades | Lower risk, easier to win |
| Avoid Deep OTM | Prevents high-risk losses |
| Choose Longer Expirations | Gives more time for your trade to work |
| Use Strike for Risk Control | Helps define expected move |
Conclusion
Strike price selection doesn’t have to be complicated. As a beginner, focus on ATM and ITM options, give your trades time to develop, and avoid speculative OTM contracts. These simple strategies will help you build consistency while you gain experience.
FAQs
Q1. Which strike price is best for a beginner call option trade?
Start with an ATM or slightly ITM strike for better success rates.
Q2. Should I buy OTM options if they’re cheaper?
No—cheaper doesn’t mean better. OTM options often expire worthless.
Q3. How do I know if a strike price is safe?
Check how close it is to the market price and calculate the break-even point.
Q4. How far should the expiry be for beginners?
Choose options with at least 30–45 days to expiration for more flexibility.
Q5. Can I change the strike price after I’ve bought the option?
No. Once purchased, the strike price is fixed. You can only close or roll the position
