3. Open the Options Chain

▪ Begin by looking at expirations around 21 days to expiration (DTE).

​▪ If 21 DTE isn’t available (as in the example where only 25 DTE was shown), choose one close to that timeframe, but never go less than 7 days out.
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​▪ ​In the example, 25 days was close enough to begin analysis.

4. Check Open Interest

▪ Look for 250+ in open interest.

▪ A rule of thumb: you want 4–6 times more contracts in open interest than you plan to buy.

▪ For example, an open interest of 16,000 is more than enough.

▪ ​If open interest is zero, you may skip that strike, unless it’s a new strike with expected volume coming in.

5. Bid-Ask Spread

▪ Look for a bid-ask spread less than $0.50.

▪ This indicates tight liquidity.

▪ Even if some spreads are wider, many will still meet this rule.

6. Extrinsic Value Calculation

▪ You want 20% or less extrinsic value.

▪ This is the uncertainty value of the option.

▪ Use a calculator to find:

▪ In the example:

○ Extrinsic value: $142

○ Total option price: $1,610

​○ Result: 8.8% extrinsic value

7. Delta Confirmation

▪ The selected strike should be around 80 delta.

​▪ In the example, the final choice was 0.83–0.84 delta, which met the criteria.

If the trade is set up, meets every condition, and fits your plan, then this would be the trade to take.