Free lessons › Options Mastery › Core Strategies

Choosing the strike and expiration

Delta, time and cost: picking a contract that fits the setup.

10 min · Beginner

What you'll learn

• Match expiration to the setup's expected timeline with a buffer
• Compare contracts by delta, cost, breakeven and behavior at the stop and target
• Reject low-delta weeklies that cannot fit the trade plan

Key takeaways

• Pick the contract from the stock plan, not from the price tag.
• Expiration should cover roughly two to three times the expected holding period.
• Delta around 0.50 to 0.70 is more forgiving; low-delta weeklies are lottery tickets.
• Compare contracts at the target, at the stop and in a slow-move scenario before choosing.
• The 1% premium-at-risk rule decides how many contracts you can hold.

Glossary

• Days to expiration (DTE) — The number of calendar days left until an option expires.
• Lottery ticket — Slang for a cheap, far out-of-the-money, short-dated option that usually expires worthless.
• Holding period — How long you expect a trade to take from entry to target or exit.

Unlock this lesson

The full lesson, quiz and practice task are included with the Academy plan. Elite includes a 7-day free trial. See plans

← Buying calls and puts with defined risk Vertical debit spreads →