Strike, expiry and premium
A short option has two dials. The strike sets how far the stock has to travel before the trade turns against you, and the expiry sets how long it has to do it. The premium is what the market pays you for the combination. Neither dial moves the premium in a straight line, and the second one surprises people.
Everyone gets the first dial. Further away means safer and cheaper. What gets missed is how fast cheaper arrives, and what the second dial does when you change it.
Dial one: the strike
DKNG at $38.40, September 19, 45 days out. Walk the call side up.
| Strike | IV | Bid | Ask | Mid | Delta | Volume | Open interest |
|---|---|---|---|---|---|---|---|
| $36 call | 41.0% | $3.60 | $3.75 | $3.67 | 0.711 | 214 | 3,118 |
| $37 call | 39.6% | $2.93 | $3.05 | $2.98 | 0.646 | 331 | 2,004 |
| $38 call | 38.4% | $2.32 | $2.41 | $2.36 | 0.573 | 1,207 | 6,442 |
| $39 call | 37.4% | $1.80 | $1.87 | $1.83 | 0.495 | 688 | 3,975 |
| $40 call | 36.6% | $1.35 | $1.41 | $1.38 | 0.416 | 2,946 | 22,107 |
| $41 call | 35.9% | $1.00 | $1.05 | $1.02 | 0.339 | 402 | 2,687 |
| $42 call | 35.3% | $0.71 | $0.76 | $0.73 | 0.268 | 1,015 | 9,204 |
| $43 call | 34.8% | $0.49 | $0.53 | $0.51 | 0.205 | 77 | 1,388 |
| $44 call | 34.4% | $0.33 | $0.38 | $0.35 | 0.153 | 12 | 640 |
| $45 call | 34.1% | $0.21 | $0.26 | $0.23 | 0.111 | 843 | 5,412 |
From $40 to $44 the delta roughly falls by a factor of three, from 0.416 to 0.153. The premium falls by a factor of four, from $138 to $35. That is the general shape: premium decays faster than risk as you go further out.
Which is the argument against the very far strike. The $45 call bids $0.21. Twenty one dollars, for six and a half weeks of holding an obligation, on a name that can move 8 percent on a Thursday. There is a whole page on why that trade is worse than it looks, and the short version is that the money is too small to matter and the tail is not.
It is also the argument against the near strike. The $39 call pays $183, which is real money, and it is 0.495 delta: a coin flip on whether your shares get taken. Strike selection has its own page and the usable band for most sellers sits between those two, around 0.20 to 0.30.
Dial two: the expiry
Here is where the intuition breaks. Same stock, same day, three expiries: 17 days, 45 days, 73 days.
| Strike | 17 days | Per day | 45 days | Per day | 73 days | Per day |
|---|---|---|---|---|---|---|
| $38 | $1.51 | $8.90 | $2.36 | $5.24 | $2.98 | $4.08 |
| $40 | $0.62 | $3.64 | $1.38 | $3.07 | $1.96 | $2.69 |
| $42 | $0.19 | $1.11 | $0.73 | $1.63 | $1.22 | $1.67 |
| $43 | $0.09 | $0.55 | $0.51 | $1.14 | $0.94 | $1.29 |
Read the per-day columns and the rule everyone repeats falls apart. "Sell short-dated, time decay works faster" is true at the money, where the 17-day $38 call pays $8.90 a day against $4.08 for the 73-day. Go out to the $43 strike and it reverses completely: $0.55 a day at 17 days, $1.29 a day at 73.
The reason is that a far strike needs time to be worth anything at all. Seventeen days is not enough for DKNG to travel from $38.40 to $43, so the market prices that contract at nine cents and there is nothing to decay. The theta page draws both curves and they genuinely bend in opposite directions.
So the honest version of the expiry rule: short-dated wins near the money, longer-dated wins far out of it. Which is one more reason the 0.20 to 0.30 delta band and the 30-to-50-day window keep turning up together. They are where the two effects meet.
What you are giving up in each direction
Both dials cost something and the costs are not symmetric.
Further out on strike costs you money now, keeps your shares longer, and does nothing for the disaster case. A stock that gaps 25 percent blows through the $43 call and the $45 call on the same morning.
Further out in time costs you flexibility. A 73-day contract holds the position across two earnings dates on many names, locks your strike at a level chosen 73 days ago, and hands you back less premium per day at any strike near the money. It also means fewer decisions a year, which for some people is the point.
Nearer in time costs you in fills. Selling weeklies means 52 round trips a year, and crossing the spread 52 times is a real annual fee that never appears on a per-trade calculation.
The number that ties them together
Compare the $42 call at 45 days, $73 of credit, against the $40 call at 17 days, $62 of credit. The second one pays less. It also ties up your shares for 28 fewer days, which means you can do it again.
Annualizing is how you compare them, and it is where people fool themselves. $62 on $3,840 of stock over 17 days annualizes to 34.7 percent. That number assumes you get the same trade 21 more times this year, at the same volatility, with no assignment ever. The annualizing page lists the four assumptions buried in it, and the honest use of the figure is comparing two contracts today, not forecasting a year.
OptionsKing scores every candidate strike on a deterministic 0 to 100 scale, blends that score with the return on the capital the trade ties up, and shows you the highest-ranked handful. There is no minimum score. How it works covers what the ranking does and does not tell you.
Questions people actually ask
Does a shorter expiry always decay faster?
Only near the money. On the worked chain the 17-day $38 call pays $8.90 a day against $4.08 for the 73-day. At the $43 strike it reverses: 55 cents a day at 17 days against $1.29 at 73, because a far strike needs time to be worth anything.
How far out of the money should I sell?
Premium falls faster than risk as you go out, so the far strikes stop being worth the obligation. On this chain the $45 call pays $21 for six and a half weeks. Most sellers end up between 0.20 and 0.30 delta, which here is the $42 to $43 area.
What is the best number of days to expiration?
Thirty to fifty is where the two effects meet: short enough that decay near the money is meaningful, long enough that an out-of-the-money strike is worth selling. Shorter means more fills and more spread paid; longer means fewer decisions and a strike locked in early.
Why does the premium fall so fast as the strike goes up?
Because it is pricing a probability that is falling faster than the distance is growing. From the $40 to the $44 call, delta drops by roughly two thirds and the premium drops by three quarters.
Sources
Rules and thresholds above were checked against these documents on August 4, 2026. Exchange and broker rules change. Confirm anything you are about to act on with your own broker.
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Do the math on your own trade
Every price in this article is an illustrative worked example, not a quote. Read Options basics for the rest of the series, and the disclaimer before you act on any of it. Selling options carries real risk of loss, and the loss can be far larger than the premium you collected.