Choosing the Right Strike Price
Choosing the wrong strike price is the #1 reason beginners lose money, even when they predict the market direction correctly.
The Three Zones of Moneyness
Every option chain is divided into three zones based on where the Spot Price is relative to the Strike.
| Zone | Definition | Risk/Reward |
|---|---|---|
| ITM (In The Money) | Strike has intrinsic value. (e.g., Call Strike < Spot) | High Delta (moves fast). Expensive. |
| ATM (At The Money) | Strike closest to Spot Price. | Balanced. High Liquidity. Best for scalping. |
| OTM (Out The Money) | Strike has NO intrinsic value. Pure hope. | Low Delta (moves slow). Cheap. High Decay risk. |
What Should You Buy?
For Intraday Momentum (Scalping)
Choose ATM or slightly OTM (1 strike away). You need Gamma spikes.
For Positional Trends
Choose ITM. It behaves more like a future contract and suffers less Time Decay.
Avoid Deep OTM
"Hero or Zero" trades usually end up Zero. The probability of Nifty moving 500 points in 1 day is extremely low.
Live Exercise
Go to the Chart Dashboard. Select a Date. Look at the strikes available in the dropdown. The middle one (closest to current LTP) is your ATM. Everything above it (for Calls) is OTM.
*Disclaimer: NSE/BSE frequently revise Lot Sizes and Expiry Days (e.g., SEBI Circulars 2024/2025). Always check the latest circular on nseindia.com before trading.
Standard Disclosure: Investment in securities market are subject to market risks. Read all the related documents carefully before investing. The content provided here is for educational purposes only and does not constitute financial or investment advice. AlgoStraddle Academy is not a SEBI registered investment advisor. Trading options involves high risk and capital can be lost.