Strike Selection

Strike Selection determines which options strike price each leg of your strategy trades. Algo Architech offers five methods, ranging from simple fixed offsets to sophisticated institutional-grade dynamic selection.

Method 1: ATM / Fixed Offset

The simplest method — select a strike at a fixed distance from the current At-The-Money (ATM) price.

Setting	Example	Resulting Strike
`ATM`	Nifty at 22,000	22,000 CE/PE
`ATM+1`	Nifty at 22,000	22,050 CE or 21,950 PE
`ATM+2`	Nifty at 22,000	22,100 CE or 21,900 PE
`100 OTM`	Nifty at 22,000	22,100 CE or 21,900 PE

Best for: Simple strategies with predictable risk profiles.

Method 2: Deep OTM Dynamic

Let the engine dynamically scan for the deepest Out-Of-The-Money options that meet your underlying price relative boundary. Instead of fixing a strike distance, you define conditions and the engine hunts for the optimal contract.

Best for: Premium selling strategies where you want maximum distance from the current price while maintaining acceptable liquidity.

Method 3: VIX ATR (Volatility-Adaptive)

Strike distance automatically adapts based on current market volatility using VIX and Average True Range (ATR).

How It Works


Low Volatility (VIX = 12):   Strike distance = Narrow  (e.g., 100 points OTM)
High Volatility (VIX = 25):  Strike distance = Wide    (e.g., 300 points OTM)

The engine uses the current VIX reading to scale the ATR-based strike distance. When markets are calm, strikes stay closer. When volatility explodes, strikes push further out automatically.

The Trading Edge

Setting fixed 100-point OTM strikes works in calm markets, but it’s dangerous when volatility expands. A VIX spike can easily breach your strikes within minutes.

By using VIX ATR selection, your strategy physically adapts its strike width to the current volatility regime. In high-VIX environments, your sold strikes are automatically pushed further away from the money — drastically reducing the probability of getting breached by random noise swings.

Best for: Iron Condors, Strangles, and any strategy that sells premium.

Method 4: Options Greeks Targeting

The most sophisticated method — select strikes by targeting a specific Greek value.

How It Works

Instead of selecting “100 points OTM”, you instruct the engine:

“Sell the put that has a Delta of 0.15”

The engine evaluates the options chain in real-time and selects the strike that matches your target Greek.

Available Greeks for Targeting

Greek	What It Measures	Example
Delta	Sensitivity to price change	`Delta = 0.15` → Far OTM, low probability of breach
Gamma	Rate of Delta change	Target low Gamma for stable positions
Theta	Time decay rate	Target high Theta for maximum premium collection
Vega	Sensitivity to volatility	Target low Vega for vol-neutral setups

Net vs Single Mode

Mode	Description
Net	Target the combined Greek exposure of the entire portfolio. E.g., “Make the whole Bull Call Spread have a Net Delta of 0.3” — the engine selects the OTM strike to achieve this.
Single	Target a Greek on a single individual leg only.

The Pro Edge

This is how institutional quant desks build positions. They don’t think in “100 points OTM” — they think in Delta. A 0.15 Delta put is always statistically ~15% likely to end in-the-money, regardless of where the index is trading. This mathematical consistency is far more reliable than fixed-point offsets.

Best for: Delta-neutral portfolios, institutional-grade position construction.

Method 5: Reference Order

Select a strike based on the execution details of another leg within the same strategy.

How It Works

If Leg 1 is a bought Call at 500₹ premium, you can configure Leg 2 to:

“Sell a Call where the premium is < 30% of Leg 1’s premium”

The engine uses Leg 1’s actual executed premium to dynamically find the appropriate strike for Leg 2.

Use Cases

Setup	How Reference Orders Help
Ratio Spreads	Buy 1 ATM Call → Sell 2 OTM Calls where each premium covers 50% of Leg 1
Zero-Cost Structures	The sold premium exactly offsets the bought premium
Precise Risk/Reward	Maintain mathematical ratios between legs regardless of market conditions

The Pro Edge

Reference Orders let you construct mathematically perfect spread ratios exactly as institutional quants do. Instead of guessing which OTM strike gives you the right risk/reward balance, the engine calculates it dynamically based on real market prices.

Best for: Ratio spreads, zero-cost hedges, premium-funded structures.

Choosing the Right Method

Your Goal	Recommended Method
Simple, predictable strikes	ATM / Fixed Offset
Adapt to volatility conditions	VIX ATR
Build delta-neutral portfolios	Greeks Targeting
Create self-funding spreads	Reference Order
Maximum OTM distance with liquidity	Deep OTM Dynamic

Next Steps

Learn how to select the right expiration for your positions:

→ Next: Expiry Selection