SPX · Options Education
How to Choose an SPX Option Strike
By Hamza Hamed, Founder of HamedTrades · Published · Updated · 5 min read
Direct answer: Choose an SPX strike by matching the contract to the trade thesis, not by searching for the cheapest premium. Compare moneyness, delta, bid-ask spread, expiration, expected stop distance and total dollar risk. Near-the-money strikes often provide stronger responsiveness than far-out-of-the-money contracts, while in-the-money strikes generally offer higher delta at a higher premium cost.
Strike selection determines how an SPX trade translates from the index chart into the option contract.
Two calls with the same expiration can produce very different results even when SPX moves in the same direction.
Start With the Underlying Setup
Before opening the option chain, define:
- SPX entry area;
- invalidation level;
- expected target;
- expected duration of the trade.
Only then choose the contract.
Starting with “I want a $2 option” reverses the process and encourages low-quality strike selection.
In the Money
An in-the-money call has a strike below SPX. An in-the-money put has a strike above SPX.
ITM options usually have higher absolute delta than comparable OTM options. That can make their premium respond more directly to SPX movement.
The tradeoff is cost. More intrinsic value and higher delta often mean a larger premium per contract.
At or Near the Money
Near-the-money options are close to the current SPX level.
They are popular with short-term traders because they can offer a balance between:
- meaningful delta;
- active liquidity;
- manageable premium relative to deeper ITM options.
Near expiration, ATM options can also carry strong gamma risk.
Out of the Money
OTM calls have strikes above SPX and OTM puts have strikes below SPX.
They often look attractive because the premium is lower.
But lower premium can come with lower delta and a greater requirement for SPX to move quickly and far enough.
A $0.80 option is not automatically a better risk than an $8.00 option. Ten of the $0.80 contracts still cost $800, and their probability profile can be very different.
Delta as a Strike-Selection Tool
Delta provides a quick way to compare directional sensitivity.
A trader may compare a 0.60-delta call with a 0.30-delta call and ask:
- How much SPX movement is expected?
- How much premium am I paying?
- How quickly do I need the move?
- How much gamma will affect the trade?
Delta is not a probability guarantee, but it is a useful risk descriptor.
Liquidity Matters
Do not choose a strike based only on delta or price.
Check the actual market:
- bid;
- ask;
- spread;
- quoted size;
- trading activity.
A wide spread creates friction before the trade even starts.
If an option is $4.00 bid and $4.80 ask, the trader is paying a meaningful execution cost compared with a more competitive strike.
Expiration Changes the Same Strike
A 6,000 call expiring today is a very different instrument from a 6,000 call expiring next week.
The longer-dated option usually contains more time value and responds differently to theta, gamma and vega.
Strike selection and expiration selection should therefore happen together.
Use the Stop to Compare Contracts
Suppose SPX invalidation is 8 points below entry.
Compare two calls:
Contract A
Entry premium: $6.00
Estimated premium at invalidation: $4.70
Risk: $130 per contract
Contract B
Entry premium: $2.50
Estimated premium at invalidation: $1.45
Risk: $105 per contract
Contract B is cheaper, but the actual planned risk is only $25 less in this example. If its delta is much lower, the tradeoff may not be worth it.
Compare risk and responsiveness—not sticker price.
Avoid the Lottery-Ticket Trap
Far OTM contracts can produce dramatic percentage gains when a large move occurs. That makes screenshots look exciting.
But the decision process should account for all the times the required move does not happen.
A repeatable process asks:
- Does this strike need an unrealistic move?
- Is there enough time?
- Is the premium likely to hold if SPX pauses?
- Is the expected reward worth the probability and risk?
0DTE Strike Selection
On 0DTE, strike selection becomes even more sensitive because time is nearly gone.
Far OTM options can decay toward zero quickly. Near-the-money options can experience intense gamma. Deep ITM options can require substantial premium.
There is no universal “best” 0DTE strike.
The best contract is the one whose behavior matches the setup and risk budget.
A Simple Strike-Selection Checklist
- Define SPX setup and invalidation.
- Choose an expiration that matches the thesis.
- Compare ITM, ATM and OTM strikes.
- Review delta.
- Review spread and liquidity.
- Estimate premium at the underlying stop.
- Calculate dollar risk per contract.
- Choose contract count only after that.
- Check major event risk.
- Skip the trade if every suitable strike requires too much risk.
Bottom Line
Strike selection is not about finding the option that can produce the biggest percentage screenshot. It is about translating an SPX thesis into a contract with appropriate sensitivity, liquidity, expiration and dollar risk.
Frequently Asked Questions
Is at-the-money always the best SPX strike?
No. ATM may provide useful responsiveness and liquidity, but the best strike depends on the setup, expiration and risk budget.
Why not always buy the cheapest OTM option?
Cheap OTM options often have lower delta and may require a larger, faster SPX move before expiration.
What does delta tell me when choosing a strike?
Delta estimates current directional sensitivity and helps compare how different strikes may respond to SPX movement.
Should I choose strike before expiration?
They should be considered together because the same strike behaves very differently with different time remaining.
Does a higher premium mean more risk?
Not necessarily. Planned risk depends on the entry, expected exit at invalidation, contract count and possible slippage—not only the premium paid.
Primary Sources
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About the Author
Hamza Hamed is the founder of HamedTrades. He creates educational content about SPX, SPY, QQQ, ES futures, NQ futures, options, position sizing, risk management, market structure and trade review.
Educational Disclaimer
HamedTrades provides educational content and market commentary only and does not provide personalized investment, financial, legal or tax advice. Trading stocks, options, futures and other financial instruments involves substantial risk of loss and may not be appropriate for everyone. Examples in this guide are simplified for education and do not represent guarantees, recommendations or promises of future results. Past performance does not guarantee future results.