3. Trade slightly out-of-the-money, at-the-money, or slightly in-the-money options
The reasons here are the opposite of the reasons I prefer to stay away from the deep options. These options have a reasonable chance of proving profitable when buying; you gain from the maximum possible time decay when selling; and they are generally the most liquid of the bunch, resulting in a tighter bid/asked spread, which in turn saves on transaction costs. The one variation on this theme has to do with selling options; in this case, it is certainly fine, and even advantageous, to sell out-of-the-money options with this one caveat—the premium received must warrant the risk. What price might this be? There are no hard and fast rules; you just need to use good ...
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