If Immediate ITM Call Is Cheaper — The Complete Guide to Strike & Expiry Selection for Intraday Traders
One of the biggest challenges for new and even seasoned option traders is knowing which strike price and expiry to select. Many focus only on direction — buying a call when bullish or a put when bearish — but ignore the mechanics of delta, time decay, and implied volatility (IV). These determine how fast or slow your profit will move. This guide explains in detail how to choose between in-the-money (ITM) and out-of-the-money (OTM) calls and which expiry to trade on both normal and expiry days, supported by rich data tables and simple logic.
Basic Option Concepts Explained Simply
| Term | Definition | Practical Meaning |
|---|---|---|
| In-the-Money (ITM) Call | Strike price below current market level | Already has some real profit; moves fast with the underlying |
| Out-of-the-Money (OTM) Call | Strike above current market level | No intrinsic value yet; cheaper but riskier |
| Intrinsic Value | Spot Price – Strike Price | Real money built into the option |
| Time Value | Premium paid for future potential | Decreases as expiry nears (Time Decay / Theta) |
| Implied Volatility (IV) | Market’s expectation of movement | Higher IV = costlier options; lower IV = cheaper |
| Delta | Change in option price for ₹1 move in underlying | Higher delta = faster profit response |
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Comparative Table — ITM vs OTM Calls
| Parameter | ITM Call | OTM Call | Interpretation |
|---|---|---|---|
| Delta (Sensitivity) | 0.6 – 0.9 | 0.2 – 0.4 | ITM moves almost in sync with underlying; OTM lags |
| Implied Volatility | Usually lower | Usually higher | Lower IV means better stability for ITM |
| Time Decay (Theta) | Slow | Fast | OTM options lose value quicker if price stagnates |
| Liquidity | Moderate to High | Very High | OTM attracts more retail traders |
| Capital Requirement | Higher | Lower | ITM costs more but safer; OTM cheaper but riskier |
| Profit Consistency | High | Low | ITM better for steady profits, OTM for big one-shot gains |
| Risk of 100% Loss | Low | High | OTM often expires worthless if no quick move |
Which Expiry to Choose — Day-wise Strategy
| Trading Day | Best Expiry to Use | Recommended Strike Type | Reason / Ideal Use Case |
|---|---|---|---|
| Normal Day (Non-Expiry) | Next Weekly Expiry | ITM / ATM | Smoother movement, slower time decay — ideal for directional trades |
| Expiry Day | Same Day Expiry | ATM / Slight ITM | High volatility and fast price swings; great for scalping |
| Before Big Events (Budget, RBI Policy, Results) | Event Week Expiry | OTM / ATM | Volatility spike expected; OTM gives best leverage |
| Sideways Market | Next or Monthly Expiry | ITM / Sell Options | Avoid time decay; better to sell premium than buy |
| Volatile / Trending Market | Current Week Expiry | ITM | ITM gives stable delta-based profits without premium collapse |
💡 Quick Tip: On expiry day, even 10–15 minutes delay can turn profit into loss due to fast time decay. For normal days, next week’s expiry provides more breathing room and smoother price movement.
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Combined Strategy Table — Strike + Expiry + Condition
| Market Outlook | Best Strike | Best Expiry | Why It Works |
|---|---|---|---|
| Steady uptrend / bullish intraday | ITM Call | Next weekly expiry | High delta, minimal time decay, smooth tracking of underlying |
| Quick momentum or news breakout | Near OTM Call | Same week expiry | Leverages sudden price movement |
| High IV scenario | ITM Call | Current expiry | Avoids paying extra for inflated volatility |
| Low IV scenario | OTM Call | Next expiry | Cheap premiums, can benefit from volatility expansion |
| Sideways / neutral market | Sell OTM Options | Same week expiry | Earn from time decay while prices stay flat |
Final Verdict — Simplified Rulebook
- For consistent intraday trading → pick ITM Call with next weekly expiry.
- For expiry-day scalping → use ATM or slightly ITM Call with same day expiry.
- For quick breakout trading → try near OTM with current week expiry.
- For event or news play → choose OTM with event week expiry.
- Always check implied volatility. If ITM has lower IV than OTM, it’s the smarter buy.
Investor Takeaway
Indian-Share-Tips.com Nifty Expert Gulshan Khera, CFP®, who is also a SEBI Regd Investment Adviser, advises that professional traders don’t chase cheap options — they chase the right delta and expiry. For steady trends, ITM options provide smoother and reliable returns. On expiry days, ATM strikes are ideal for scalping, while OTM works best for event-driven spikes. Remember, the costliest mistake in options trading is not direction — it’s wrong expiry and wrong strike selection. Learn structured expiry setups and delta-based selection models at Indian-Share-Tips.com, which is a SEBI Registered Advisory Services.
