You've picked a stock and decided on a strategy (covered call or cash-secured put). Now comes the most important decision: which strike price do you sell? The answer depends on your understanding of delta and your risk tolerance.
Too close to the current price and you'll get assigned frequently. Too far away and the premium isn't worth the effort. The right strike balances income, probability, and your personal comfort level.
What are the three ways to pick a strike price?
By delta (recommended)
Delta directly tells you the probability of assignment. Pick your comfort level (0.20 = conservative, 0.30 = moderate, 0.40 = aggressive) and sell the strike closest to that delta. This is the professional approach.
By percentage distance
Choose a strike that's a certain percentage above (for calls) or below (for puts) the current stock price. Example: 5% OTM on a $230 stock = $242 call or $218 put. Simple but less precise than delta.
By target yield
Work backward from the income you want. If you want 1.5% per month on your capital, find the strike that pays that premium. This approach can lead you into higher-risk strikes if your yield expectations are too aggressive.
How do you use delta to choose a strike price?
Delta is a number between 0 and 1 that roughly equals the probability of the option finishing in-the-money. For sellers, 1 minus delta is your probability of profit (our delta deep dive covers this in detail).
Covered call: Sell the $245–$250 call on AAPL at $230. Very far OTM. Premium: $1.00–$2.00.
Cash-secured put: Sell the $210–$215 put. Very unlikely to be assigned. Premium: $0.80–$1.50.
Best for: Stocks you absolutely want to keep. First few trades. Retirement accounts.
Covered call: Sell the $237.50–$240 call. Moderate distance. Premium: $3.00–$4.50.
Cash-secured put: Sell the $220–$222.50 put. Reasonable cushion. Premium: $2.00–$3.50.
Best for: Most traders, most of the time. Best risk/reward balance.
Covered call: Sell the $232.50–$235 call. Very close to current price. Premium: $5.00–$7.00.
Cash-secured put: Sell the $225–$227.50 put. Shallow buffer. Premium: $4.00–$5.50.
Best for: Income maximizers. Stocks you'd happily sell (CC) or buy (CSP) at the strike.
What factors should influence your strike selection?
1. Your relationship with the stock
Absolutely don't want to sell your AAPL shares? Go conservative (0.15 delta). Actively want to exit a JNJ position? Go aggressive (0.40+ delta). Your willingness to be assigned should drive your delta choice.
2. IV Rank
When IV Rank is high (above 50), you can afford to sell further out-of-the-money and still collect decent premium. When IV Rank is low, you may need to move closer to the money — but consider whether the premium justifies the risk. Read our implied volatility guide for the full picture.
3. Earnings dates
Never sell a strike that spans an earnings announcement unless you're prepared for a big move. Stocks can gap 5–15% on earnings. Check the calendar before picking your expiration and strike.
4. Support and resistance levels
If AAPL has strong technical support at $220 and you're selling a put, $215 is a natural strike choice — it's below support, adding an extra layer of protection. For calls, sell above resistance levels.
5. Round numbers and popular strikes
Strikes at round numbers ($220, $230, $240) tend to have more liquidity — tighter bid-ask spreads and more open interest. This means you'll get a better fill price. Avoid illiquid strikes with wide spreads.
Quick decision guide
First covered call ever?
0.20 delta
Comfortable and want more income?
0.30 delta
High IV Rank (above 50)?
0.20–0.25 delta (still fat premium)
Low IV Rank (below 30)?
Consider waiting
Earnings within DTE window?
Shorter expiration or skip
Want to sell shares (CC) or buy shares (CSP)?
0.40+ delta
Pro tip
Don't overthink it. Pick a delta range that matches your comfort level and stick with it across trades. Consistency beats optimization. A seller who always uses 0.25 delta will outperform one who agonizes over every strike choice — because they'll actually place the trade.
“The best strike price is one where you're comfortable with both outcomes. If you sell a covered call, would you be happy selling at that price? If you sell a put, would you be happy buying at that price? If the answer is no, move the strike.”
— Common principle taught by options educators including Kamikaze Cash and Option Alpha
Frequently asked questions
Should I always use the same delta?
Having a default delta is smart — most sellers default to 0.25–0.30. But adjust based on conditions: higher IV lets you go further OTM for the same income. Stocks you want to keep deserve more conservative strikes. Consistency in approach, flexibility in application.
What if no strike matches my exact target delta?
Pick the closest available strike. If you want 0.25 delta and the options are 0.22 and 0.28, either works — the difference is minor. Don't chase an exact delta number at the expense of liquidity. A liquid 0.28 delta strike is better than an illiquid 0.25.
How does strike selection differ for puts vs. calls?
The framework is the same — use delta to set probability. For covered calls, you sell above the current price (the higher the strike, the more conservative). For cash-secured puts, you sell below the current price (the lower the strike, the more conservative). Same delta means roughly the same probability of assignment for either strategy.