What is the Best Strike Price for Covered Calls?

The "best" strike depends on your goals. Here's how to choose:

Strike Selection by Goal

Goal: Maximum Income

  • Choose: ATM or slightly OTM (0.40-0.50 delta)
  • Premium: Highest
  • Assignment chance: 40-50%
  • Best for: Willing to sell shares

    • Goal: Keep Shares + Income

  • Choose: OTM strikes (0.20-0.30 delta)
  • Premium: Moderate
  • Assignment chance: 20-30%
  • Best for: Long-term holders

    • Goal: Rarely Lose Shares

  • Choose: Far OTM (0.10-0.15 delta)
  • Premium: Lower
  • Assignment chance: 10-15%
  • Best for: Very bullish outlook

    • Strike Price Cheat Sheet

    | Delta | Probability OTM | Best For | 0.5050%Maximum premium 0.4060%Balanced approach 0.3070%Keep shares likely 0.2080%High probability keep | 0.10 | 90% | Almost always keep |

    Practical Examples (AAPL at $230)

  • Aggressive: $235 strike (2% OTM) - High premium
  • Balanced: $240 strike (4% OTM) - Good income, decent protection
  • Conservative: $250 strike (9% OTM) - Low premium, likely keep shares

    • My Recommendation

    For most investors, 0.25-0.35 delta (about 5-8% OTM) provides the best balance of income and probability of keeping shares.