I select strikes using two tools:
1. Technical Analysis
2. Probabilities
1. TA- In the case of bull put spreads, I look for support points and lows within the past 52 weeks and start with strikes outside of the range.
2. I use powerful models for probability calculations and look for strikes that have a 90% or better chance of expiring worthless.
My goal here is to simply collect premium month to month. Using FOTM put and call spreads is a way I can do it without predicting the market for the month. In any given month, the market can move higher, sideways, or significantly lower and I still have a profit. In my view I am trading without concern over market direction except for a major crash lower. During a crash my contingent stop loss orders would be triggered and my Bull Put spread trades in trouble automatically closed.
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