🎯 Strike Selection in Option Structures

When configuring an option leg in your strategy, the strike selection method determines which option contract to trade based on its relationship to the underlying. Allasso provides flexible options to define strikes dynamically, using five distinct methods.

Each strike is selected by choosing a strike_type and entering a corresponding strike_value. Here's how each type works:

1. Delta

Selects the strike based on the option delta.

• Formula: Find the strike where the delta of the options is closest to the selected delta.
• Value Range: 0 – 100

📌 Example:

• strike_type = delta, strike = 25 (0.25)
  → Selects the 25-delta option 

2. Moneyness (mny)

Selects strike using moneyness, defined as the ratio of strike to spot.

• Formula: Moneyness = Strike / Underlying Price

📌 Example:

• strike_type = mny, strike = 0.95
  → Selects a strike that is 5% below the underlying price (e.g., ATM or slightly OTM put).

3. Log Moneyness (logmny)

Uses logarithmic moneyness, which adjusts for volatility skew and pricing asymmetry.

• Formula:  Log Moneyness = log(Strike /  Underlying Price)

📌 Example:

• strike_type = logmny, strike = -0.05
  → Selects a strike slightly below spot (negative log moneyness implies OTM put).

4. Quick Delta

A fast approximation of delta, useful for faster scans or simpler modeling.

• Formula: 

  

📌 Example:

• strike_type = quick_delta, strike = 0.30
  → Approximates a 30-quick-delta strike  

5. Percent of Underlying (perc_und)

Selects the strike by targeting an option with a premium equal to a specified percentage of the underlying's spot price.

• Goal: Choose the strike where the option’s premium ≈ is X% of the underlying price.
• This is useful when you want to control exposure based on premium cost relative to the underlying, rather than delta or moneyness.

📌 Example:

• strike_type = perc_und, strike = 2
  → Selects the strike where the option premium is approximately 2% of the underlying’s price.

This method is helpful for premium-selling strategies (e.g., short puts or covered calls) where your risk or return is anchored to the amount collected.

🛠 Tips for Using Strike Selection

• Use delta for traditional skew-driven strategies (e.g., 25-delta call/put)
• Use mny or perc_und to express strike as a relative price level
• Use logmny for modeling skew-aware strategies
• Combine strike types across legs to build hybrid spreads (e.g., delta + perc_und)