How to pick strike prices?

Hey guys, I wanted to share some tips and strategies that I've learned along the way.

First off, let's define what a strike price is. It's the fixed price at which an option contract can be exercised when the underlying asset reaches or exceeds that price. That said, choosing the right strike price directly impacts your returns and risk management.

When it comes to picking the strike price, you need to consider:

1. Current market conditions: This includes industry trends, stock movements, market volatility, and more.

2. Price fluctuations of the underlying asset: This involves our expectations of the asset's price movement and risk management.

3. Investment objectives: Different goals require different strategies, such as pursuing high returns or conservative investments.

4. The relationship between the strike price and option premiums: The higher the strike price, the lower the premium, and vice versa. This affects both your costs and potential gains.

By weighing these factors, you can arrive at a reasonable strike price. Here are some tips and strategies that I've found helpful:

Define your risk tolerance: This helps you make better risk management decisions.

Choose a "balanced" strike price: Typically, selecting a strike price close to the current stock price prevents losses or missed opportunities caused by those that are too high or too low.

For high-risk trades, choose a lower strike price: This allows you to manage risk effectively while maximizing profit potential.

To share an example, let's say you have a bullish outlook on Apple stocks and think it will reach $190 in the near future. You could buy a call option with a strike price of $185, giving you the right to buy Apple shares at $185 if its price goes above that level. This way, even if the price doesn't hit $185, you can still make a profit from the difference between $185 and the actual price.

These are just some tips and examples I've learned about selecting strike prices for options trading. As a newbie trader, I'm still learning and have a long way to go. But I hope sharing my experiences can help you guys become better traders too!