Mastering the Art of Selling Options: IV, IVR, Delta, and Strike for Maximum Profit

Selling options is a popular strategy for generating income, but selecting the right contract can be critical to maximizing profits while minimizing risks.

Let’s dive into specific examples using key factors like delta, implied volatility (IV), Implied Volatility Rank (IVR), and the distinction between ATM, ITM, and OTM options.

We’ll also explore how to trade 0DTE and far OTM options with trading examples.

1. Choosing the Best Delta When Selling Options:

Delta represents both the probability of the option expiring ITM and how much the option price will change with a $1 move in the underlying asset.

Example:
Let’s assume the underlying stock is trading at $100.

-0.15 Delta Option:
— Strike: $90 Put
— Premium: $0.50 (or $50 per contract)
— Probability of expiring ITM: 15%
— The option seller has a high probability (85%) of keeping the premium and not being assigned.