How to Select the Best Strike Price While Trading Options in India (Beginner-Friendly Guide)

What is a Strike Price?

The strike price (also called exercise price) is the price at which you can buy (Call option) or sell (Put option) the underlying asset.

For example:

• If you buy a NIFTY 22500 Call Option, the strike price is 22500.

• If NIFTY goes above 22500, your call becomes valuable.

Why is Strike Price Selection So Important?

Choosing the wrong strike price is like buying a ticket for the wrong train. You might reach somewhere, but it won’t be your destination.

A good strike price = higher chances of profit with limited risk.

Good strike price selection helps:

• Balance risk and reward

• Lower premium cost

• Increase profitability

• Manage losses better

Know These Basics First (Very Important!)

To pick the best strike price, you must understand these terms:

1. ITM (In the Money)

• Call Option: Strike price < current market price

• Put Option: Strike price > current market price

• Safer but more expensive

•  Good for quick profits with higher cost

2. ATM (At the Money)

• Strike price ≈ market price

• Balanced risk-reward

• Moderate premium

3. OTM (Out of the Money)

• Call Option: Strike price > current market price

• Put Option: Strike price < current market price

• Cheaper but riskier

• Less chance of profit, but big payoff if it works

Types of Strike Prices:

How to Select the Best Strike Price (Step-by-Step)

Step 1: Know the Market Trend

Ask yourself: Where is the market going?

• Uptrend? Buy Call options

• Downtrend? Buy Put options

• Sideways? Avoid aggressive options

Pro Tip: Use Simple Moving Averages (SMA) or MACD to judge trend direction.

Step 2: Check the Volatility

• Use India VIX to check market fear or excitement.

• High VIX = Expensive premiums (select slightly ITM)

• Low VIX = Cheap premiums (you can go ATM or OTM)

Pro Tip: Avoid buying options in extremely high VIX unless you’re experienced.

Step 3: Set Your Risk Appetite

• Low risk? Choose ITM

• Moderate? Choose ATM

• High risk = high reward? Choose OTM

Think like this:

Step 4: Time to Expiry (Very Important!)

Options lose value fast as expiry approaches (called time decay or Theta).

• Less than 3 days left? Avoid OTM. Stick to ATM or ITM.

• More than 10 days? You can consider OTM if expecting a big move.

Pro Tip: OTM options become worthless quickly if the move doesn’t happen.

Step 5: Use Option Chain Data

Visit NSE Option Chain to check:

• Open Interest (OI): Shows trader interest

• IV (Implied Volatility): High IV = expensive option

• Premium: Cost of option

Pro Tip: Look for strike prices with high OI and volume — they are the most active and liquid.

Real-Life Examples (Nifty & Bank Nifty)

Example 1: Nifty at 17500, You Expect It to Go to 17700 in 5 Days

• Best strike = 17600 or ATM 17500 Call Option

• Avoid 17900 (too far, unlikely to reach)

• Premium should be moderate and affordable

Example 2: Bank Nifty at 45000, You Think It’ll Crash to 44000 in 2 Days

• Best strike = 44500 or 44700 Put Option

• Avoid 44000 Put (too risky with only 2 days left)

• Choose with good volume & OI

Comparison Table of Strike Types

Pro Tips from Traders

• Stick to ATM/ITM if you’re new.
  OTM options are cheap but often expire worthless.

• Never invest all your capital in one trade.
  Risk max 2–3% per trade.

• Always check liquidity.
  Avoid strikes with low OI or volume.

• Don’t buy options on expiry day unless you’re scalping.
  Time decay eats up your premium fast.

• Use a journal to track trades and strike performance.
  Learn from mistakes and wins.

• Use strategies like Spreads once you’re confident with strike selection.

Sample Option Chain Screenshot

Use this table to identify:

• High Open Interest (OI) = Liquidity

• Balanced Premium = Lower cost vs. reward

• Volumes = Trader activity and confidence

Strike Selection Strategy (Decision Tree Flowchart)

Quick Recap (Cheat Sheet)

Glossary of Common Terms

Case Study (Success & Failure Examples)

Successful Example:

Trade Setup: Nifty at 17500
View: Will go up in 3 days
Chosen Strike: 17500 (ATM) Call
Premium Paid: ₹100
Expiry Day Price: Nifty closes at 17700
Profit: Option becomes ₹200 → 100% gain

Failed Example:

Trade Setup: Bank Nifty at 45000
View: Will crash to 44000 in 2 days
Chosen Strike: 44000 (deep OTM) Put
Premium Paid: ₹25
Bank Nifty closes at 44800 → Option becomes worthless
Loss: -100% (full premium lost)

Live Trade Log Template

You should also maintain a simple trade journal like one given below

Common Mistakes to Avoid in Strike Selection

Psychology Tip for Strike Selection

Strike selection isn’t just math — it involves mindset too:

• Avoid “lottery ticket” thinking (e.g., deep OTM)

• Think in terms of probability, not just possibility

• Be disciplined, even if a cheaper strike looks tempting

Frequently Asked Questions (FAQs) on Strike Price Selection in Options Trading (India)

1. What is the best strike price for intraday options trading in India?

Answer:
For intraday trading, the best strike prices are usually ATM (At The Money) or one step ITM (In The Money).

• Why? These have enough liquidity, move quickly with the index/stock, and are not too expensive.

• Avoid deep OTM, as they rarely turn profitable in a single day unless there’s a major move.

2. Can I trade options profitably by only buying OTM options?

Answer:
Technically, yes. Realistically, no — not consistently.

• OTM options are cheap but have a low chance of expiring in the money.

• Most expire worthless unless the market moves a lot quickly.

• New traders often overuse OTM options because of low cost — but this usually leads to losses.

3. How do I decide which strike price is best for weekly expiry?

Answer:
Ask yourself:

• How many days are left?

• Is the market trending or sideways?

• Is volatility high or low?

General rule:

• 1–2 days left → Stick to ATM or ITM

• 3–5 days left → You can consider slight OTM

• Use option chain to check OI and volume before choosing.

4. Should I choose strike prices with the lowest premium?

Answer:
No — lowest premium often means lowest chance of success.

• Far OTM strikes look attractive due to small premium (₹10–₹20), but they rarely become profitable.

• Instead, look for value, not just cheap price.

• Choose strikes with realistic probability of becoming ITM.

5. How do strike prices behave as expiry approaches?

Answer:
As expiry comes closer:

• Time decay (Theta) increases — premiums fall quickly.

• OTM options lose value rapidly.

• ITM/ATM strikes hold more value and are safer near expiry.

Pro Tip: Avoid holding OTM options during the last 1–2 days unless you’re scalping.

6. How many strike prices are available for Nifty and Bank Nifty?

Answer:

• Nifty & Bank Nifty have strike prices spaced every 50 points (Bank Nifty also has 100-point intervals for far OTM).

• Usually, 30–40 strikes are available above and below the current market price.

7. Is it better to buy ITM or sell OTM options?

Answer:

• Buying ITM = Safer if you expect a directional move.

• Selling OTM = Works best in range-bound markets.

Both are valid strategies but serve different purposes. Selling OTM requires margin and a risk management plan.

8. How do professional traders select strike prices?

Answer:
They use a combination of:

• Market trend analysis (Price Action, Indicators)

• Option chain analysis (OI buildup, IV, volume)

• Risk-reward calculation

• Time decay factor (Theta)

• Their strategy type: buying, hedging, or writing options

They rarely choose strikes randomly — every strike is part of a logic-driven system.

9. Can I use the same strike selection method for stocks and indices?

Answer:
The basics are the same, but:

• Index options (Nifty, Bank Nifty) have better liquidity, tighter spreads.

• Stock options may have wide bid-ask spreads and fewer active strikes.

Choose stocks with high volume, good option chain, and low spread when trading options.

10. What happens if I hold an OTM option till expiry?

Answer:
It expires worthless, and you lose the entire premium paid.

• You don’t owe extra money.

• But your capital is gone.

• That’s why strike selection is critical — avoid far OTM if the move isn’t likely.

11. Should I change strike price if my trade is not working?

Answer:
Yes, if the market direction has changed or time is running out.

• Example: You bought a 17500 CE (ATM), but Nifty is falling → consider cutting loss or shifting to PE.

• Don’t hold and hope — be flexible and follow price action.

12. Can I trade same-day expiry with OTM options?

Answer:
You can, but it’s extremely risky. Time decay is fastest on expiry day.

• OTM options may lose 50–80% of value in minutes if the move doesn’t come.

• Only experienced scalpers do this with tight SL and rapid execution.

13. Are options with higher open interest better to trade?

Answer:
Yes. Higher OI means:

• More liquidity

• Easier entries/exits

• Better price discovery

• Less slippage

Always prefer strikes with high Open Interest + Volume

14. What is the role of Delta in strike selection?

Answer:
Delta shows how much the option premium moves with the underlying.

• Higher Delta = Closer behavior to the actual stock/index

• Lower Delta = More dependent on big moves

15. Is strike price selection more important than entry timing?

Answer:
Both matter.

• Bad strike + good timing = Limited profits or unnecessary risk

• Good strike + bad timing = Losses due to wrong market read

The winning formula = Right Direction + Right Strike + Right Time

16. What is the best strike price for intraday option trading?

Answer

ATM or slight ITM for quick movement.

17. Can I become profitable just by buying OTM options?

Answer

Very risky — OTM needs large moves. Avoid for regular trades.

18. Is ITM always better than ATM?

Answer

Not always. ITM costs more and might give lower % returns.

19. How do I decide between Call and Put?

Answer

Identify trend direction. Bullish = Call, Bearish = Put.

Conclusion

Choosing the right strike price is like selecting the right weapon in a game — it can make or break your options trade. By understanding:

• Market direction

• Time left to expiry

• Volatility

• Open interest

• Your risk level

…you can select strikes that give you the best chance of success while managing your risks smartly.

When it comes to options trading, understanding the greeks – Delta, Gamma, Theta, Vega, and Rho is critical for building effective strategies. So do check them out, also if you are beginner in options trading I would request you to first have Basic understanding of options ,Option moneyness , How to read option chain table.

Please do not just speculate while trading in stock market in any segment, instead look for learning new strategies.

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🔗 Related Learning

• Technical Analysis Guide
• Fundamental Analysis Guide
• Financial Tools Hub
• Stock Broker Reviews Hub
• Ultimate Options Trading Guide
• Dhan DEXT Review
• How Option Trading Works
• Strike Price Selection
• Option Chain
• ITM ATM OTM
• Money needed for options trading
• Why Options Traders Lose Money

Disclaimer:

This content is intended for educational purposes only and does not constitute financial or investment advice. Options trading involves substantial risk and may not be suitable for all investors. Past performance is not indicative of future results. Always do your own research or consult a SEBI-registered financial advisor before making any trading decisions. The examples provided are for illustration only and do not represent any recommendations.