Options Trading and Momentum: How to Pick the Right Strikes

The Missing Piece in Most Options Strategies

Options trading adds a layer of complexity that stock trading does not have. When you buy shares, you are making one decision: long or short. When you trade options, you are making three: direction (calls or puts), strike price, and expiration date. Get any one of those wrong and you can lose money even when you are right about the stock's direction.

This is where momentum data becomes incredibly valuable. Most options traders spend all their time on direction and not enough on strike and expiration selection. Momentum scoring can inform all three decisions, dramatically improving your options trading outcomes.

Why Direction Alone Is Not Enough

Let us say you think Apple is going up. You buy a call option. Simple, right? But which strike? And which expiration?

If you buy a call that is too far out of the money, you need a massive move just to break even. If you buy one that expires too soon, time decay eats your premium before the stock has a chance to move. If you pick an expiration too far out, you pay extra for time value you may not need.

The right answers to these questions depend heavily on how strong the momentum is and how likely the stock is to make a sustained directional move. That is exactly what a momentum score tells you.

Using Momentum Scores to Choose Direction

This might seem obvious, but it is worth stating: trade in the direction of momentum, not against it.

• Bullish scores (+4 to +10): These stocks have upward momentum with favorable conditions. They are your candidates for call options or bull call spreads. The higher the score, the stronger the conviction.
• Bearish scores (-10 to -4): These stocks have downward pressure with weakening signals. They are candidates for put options or bear put spreads.
• Range scores (-4 to +4): No clear directional bias — signals are mixed. Directional options plays are risky here. If you want to trade options on range-scoring stocks, consider non-directional strategies like iron condors or strangles instead.

The key insight is that options magnify both gains and losses. A slight bullish lean is not enough to justify a call purchase when you are paying a premium that decays daily. You want strong, clear momentum before committing to a directional options play.

How Momentum Strength Affects Strike Selection

Here is where it gets practical. The strength of the momentum score should directly influence how aggressive your strike selection is.

Strong Bullish or Bearish (above +8.5 / below -8.5)

When a stock is in strong bullish or strong bearish territory with nearly all scoring components aligned, you can be more aggressive with your strike selection:

• Slightly out-of-the-money (OTM) strikes offer a good balance of leverage and probability. For a bullish stock trading at $150, a $155 call gives you leverage without requiring an unreasonable move.
• The strong alignment across multiple dimensions suggests the trend has legs, supporting a strike that needs some upward movement to become profitable.

Bullish or Bearish (+4 to +6 / -4 to -6)

When the stock is in a confirmed regime but not at extreme levels:

• At-the-money (ATM) or slightly in-the-money (ITM) strikes are safer. These have higher deltas, meaning they move more closely with the stock price, and they have a higher probability of profit.
• The tradeoff is less leverage, but with moderate momentum, you want to be right about direction without needing a large move.

Range (-4 to +4)

When the score shows no clear directional bias:

• Avoid directional options plays altogether, or use deep ITM options that behave more like stock (high delta, minimal extrinsic value).
• Consider spreads instead of naked calls or puts to reduce your exposure to time decay and volatility changes.

How Momentum Affects Expiration Selection

The expiration date decision is often harder than the strike decision, and momentum data helps here too.

Strong, Rising Momentum

When a stock's score is not just high but actively rising (e.g., it moved from +5 last week to +8 this week), momentum is accelerating. This supports:

• Shorter expirations (2-4 weeks out) because the move may happen quickly
• Less time value paid, more leverage on the near-term move
• But always give yourself at least one more week than you think you need — options time decay accelerates in the final week

Strong but Stable Momentum

When the score has been consistently high (e.g., +7 for the past several weeks), the stock is in a sustained trend. This supports:

• Moderate expirations (4-8 weeks out) to give the trade room to work
• The stock is trending but not accelerating, so it may take longer to reach your strike

Fading Momentum

When the score is starting to decline (e.g., from +8 to +6 to +4), the trend may be running out of steam. This is the danger zone for options buyers:

• Consider taking profits on existing positions rather than opening new ones
• If you must enter, use longer expirations to give yourself time in case momentum reverses and then resumes
• Better yet, wait for the score to stabilize before committing new capital

Practical Examples

Bullish Call Setup

You find a stock scoring +8 with all four scoring components aligned bullish. The stock is at $100.

• Strike: $105 call (slightly OTM, needs a 5% move)
• Expiration: 3-4 weeks out
• Reasoning: Strong alignment supports a continued move, OTM strike gives good leverage, and the near-term expiration captures the momentum without paying for extra time

Bearish Put Setup

A stock is scoring -9 with uniform bearish momentum. It is trading at $75.

• Strike: $72.50 put (slightly OTM)
• Expiration: 3-4 weeks out
• Reasoning: Very strong bearish momentum across all components suggests continued downside, slight OTM strike provides leverage on the expected move

Mixed Signal Caution

A stock scores +3. The trend is mildly bullish, but some scoring components are neutral or conflicting.

• Approach: Skip the directional options play entirely, or if you want exposure, buy the $100 call when the stock is at $100 (ATM) with 6-8 weeks to expiration to give the trade time to develop
• Reasoning: Mixed signals mean the stock might not move enough to overcome the premium you paid

Risk Management for Options Using Momentum

A few rules that will save you money:

1. Never risk more than 2-3% of your account on a single options trade. Options can go to zero. Size accordingly.
2. Exit when momentum shifts. If you bought calls on a stock scoring +8 and the score drops to +3, do not wait for your strike price to be reached. The thesis has weakened — take your loss or remaining profit.
3. Avoid holding through earnings unless you specifically intended to. Earnings create gap risk that no momentum score can predict.
4. Use momentum scores for the watchlist, not as a timing tool. The score tells you which stocks have the strongest momentum, not the exact day to enter. Combine scoring with your own technical entry triggers.

Get Momentum Data for Your Options Trades

If you trade options and want to start incorporating momentum data into your strike and expiration decisions, wallstreetoptionbets.com provides daily momentum scores for 3,600+ stocks. The scoring helps you identify which stocks have the strongest directional conviction — exactly what options traders need to select the right strikes with confidence.