The strike price you choose determines how much you pay, how likely you are to profit, and how much the option moves with the stock. There's no universally right answer — the best strike depends on your thesis, your time frame, and how much you're willing to risk.
The strike price sets your threshold. For a call, it's the price the stock needs to exceed for your option to have intrinsic value. For a put, it's the price the stock needs to fall below. Everything else — premium, probability of profit, breakeven — flows from this single choice.
Three zones define all strikes: in the money (ITM), at the money (ATM), and out of the money (OTM). Each trades differently and serves a different purpose.
An ITM call has a strike below the current stock price. An ITM put has a strike above it. These options already have intrinsic value — part of what you're paying is real, not just time value. They cost more, behave more like the stock itself (higher delta), and have a higher probability of expiring with some value.
Use ITM strikes when you want lower risk of losing 100% of your premium, you're willing to pay more for higher probability, or you want to use options as a lower-cost substitute for owning the stock outright.
ATM options have a strike closest to the current stock price. They carry the highest time value, a delta near 0.50, and roughly a 50% probability of expiring in the money. The stock needs to move for you to profit — you're paying almost entirely for time value and expected movement.
Use ATM strikes when you have a clear directional thesis, want balanced risk and reward, or are buying options before a catalyst like earnings.
OTM options are cheaper but require a larger move to profit. An OTM call has a strike above the current price. The further OTM, the cheaper the option and the lower the probability of profit. These offer maximum leverage — a small investment can return a large multiple — but most expire worthless.
Use OTM strikes when you expect a large, specific move and are comfortable losing the full premium if wrong, or when buying cheap insurance against a tail event.
Delta approximates the probability that an option expires in the money. A 0.30 delta call has roughly a 30% chance of expiring profitable. A 0.70 delta call has roughly a 70% chance. Most traders use delta as their primary guide for strike selection:
Aggressive (high risk, high reward): 0.20–0.30 delta — OTM, cheap, low probability of profit but high leverage if the stock moves big.
Moderate: 0.40–0.50 delta — ATM, balanced cost and probability, most common for directional trades.
Conservative: 0.60–0.70 delta — ITM, more expensive, higher probability, behaves more like owning the stock.
The delta values for every strike are visible in the OpCalc options chain. Load any ticker, select an expiration, and the chain shows exactly which strike gives you the probability and leverage you're looking for before you commit.