This guide compares strikes on the same Nifty trade with model numbers, explains how delta, premium and breakeven connect, and gives a step-by-step way to choose a strike for buying and selling options on Nifty and Bank Nifty.
The three kinds of strike
| Strike | For a call | For a put | Premium |
|---|---|---|---|
| In the money (ITM) | Below the market price | Above the market price | Highest: has intrinsic value |
| At the money (ATM) | At or nearest the market price | At or nearest the market price | Middle: all time value, the most of any strike |
| Out of the money (OTM) | Above the market price | Below the market price | Lowest: only time value |
See ITM, ATM and OTM for more on each.
The same trade at five strikes
Using Black–Scholes model prices with Nifty at 25,000, 12 days to expiry, IV of 14% and a lot of 65:
| Call strike | Premium | Cost per lot | Delta | Breakeven at expiry | Chance above breakeven (model) |
|---|---|---|---|---|---|
| 24,800 (ITM) | ₹398.30 | ₹25,890 | 0.66 | 25,198 | about 40% |
| 25,000 (ATM) | ₹280.50 | ₹18,233 | 0.54 | 25,281 | about 36% |
| 25,200 (OTM) | ₹187.50 | ₹12,188 | 0.41 | 25,388 | about 30% |
| 25,400 (OTM) | ₹118.45 | ₹7,699 | 0.30 | 25,518 | about 23% |
| 25,600 (OTM) | ₹70.55 | ₹4,586 | 0.20 | 25,671 | about 17% |
The cheaper the option, the further the market has to move before it pays, and the less likely that becomes. Cheap far-OTM options are not cheap bets; they are long-shot bets.
What happens on a quick move
Now suppose Nifty rises 200 points in 3 days, to 25,200:
| Call strike | New value | Gain per lot | Gain on cost |
|---|---|---|---|
| 24,800 | ₹505.65 | +₹6,977 | +27% |
| 25,000 | ₹360.50 | +₹5,201 | +29% |
| 25,200 | ₹241.60 | +₹3,518 | +29% |
| 25,400 | ₹151.10 | +₹2,121 | +28% |
| 25,600 | ₹87.65 | +₹1,111 | +24% |
For a quick, modest move, the percentage gains are similar across strikes, and the far-OTM call does worst. Far-OTM options pay off mainly on large, fast moves.
Delta as a guide
Delta is how much the option moves for a 1-point move in Nifty. It is also a rough guide to the chance that the option ends in the money. An ATM call has a delta of about 0.5; a 0.20 delta call ends in the money roughly one time in five. See delta.
The expected move
Implied volatility gives the size of a typical move before expiry:
At Nifty 25,000, IV 14% and 12 days, that is about 25,000 × 0.14 × 0.181 = 635 points. Roughly two times in three, the model expects Nifty to finish within 635 points of 25,000. A strike 600 points out of the money is at the edge of a normal move; one 1,200 points out needs an unusual one.
Choosing a strike to buy
- Size the move you expect. If you expect 150 points, an option with a breakeven 280 points away cannot pay at expiry.
- Set the time. If the move may take a week, buy enough time, and prefer ITM or ATM, which lose less to theta.
- Pick a delta. 0.5 to 0.7 for a moderate move; 0.3 to 0.4 if you expect a large move soon.
- Check liquidity. Use strikes with tight spreads and high open interest.
- Check the cost per lot against your risk per trade. See the position size calculator.
Choosing a strike to sell
For option sellers, the trade-off runs the other way: further OTM wins more often and collects less.
| Put sold | Premium per lot | Delta | Chance it expires worthless (model) |
|---|---|---|---|
| 24,900 | ₹11,908 | −0.40 | about 59% |
| 24,800 | ₹9,448 | −0.34 | about 65% |
| 24,700 | ₹7,371 | −0.28 | about 71% |
| 24,500 | ₹4,248 | −0.19 | about 81% |
Many sellers work between deltas of 0.15 and 0.30 and hedge with a further strike. Selling close to the money collects more but loses more often and more heavily. See the bull put spread and option selling strategies.
Strike intervals and Bank Nifty
Nifty strikes are listed at 50-point intervals, with the most active strikes at round 100s. Bank Nifty strikes are at 100-point intervals and move about twice as many points as Nifty on a typical day, so use the same delta-based approach rather than the same distance in points. Bank Nifty options expire monthly. See the Bank Nifty strategy guide.
Using open interest
Strikes with heavy open interest often act as reference levels: large call open interest above the market is read as resistance, and large put open interest below as support. They can guide where to place a short strike or a target. See Nifty PCR and max pain meaning.
Choosing strikes in QuantPower
QuantPower's option chain shows delta, IV, open interest and the bid-ask spread for each strike, and the strategy builder can select strikes by delta or by distance from the ATM strike. The option profit calculator shows the payoff and breakeven before you trade.
Common mistakes
- Buying far-OTM options because they are cheap. Most expire worthless.
- Choosing by premium instead of by move. Start with how far and how fast you expect the market to move.
- Ignoring time. A strike that suits a one-day move does not suit a one-week move.
- Using thin strikes. A wide spread costs more than a slightly better strike saves.
Frequently asked questions
Which strike price is best for option buying?
For most trades, ATM or slightly ITM strikes, with a delta of 0.5 to 0.7. They need a smaller move to profit and lose less to time decay.
Which strike price is best for option selling?
Many sellers use OTM strikes with a delta of 0.15 to 0.30, hedged with a further strike to cap the loss.
Is it better to buy ITM or OTM options?
ITM options cost more, move more with the index and lose less to time decay. OTM options cost less but need a larger move. The choice depends on the size and timing of the move you expect.
What strike should I choose on expiry day?
On expiry day, OTM options lose value very fast and ATM premiums swing widely. Traders who buy usually stay near the money; sellers widen their strikes or reduce size.
Sources
- Black, F. and Scholes, M. (1973). The Pricing of Options and Corporate Liabilities. Journal of Political Economy, 81(3), 637–654
- NSE: Equity derivatives contract specifications