I keep seeing theta brought up in options chats but it’s still not clear to me.
I understand it is one of the Greek letters but how does it impact my trades?
I mostly do basic trades and want to learn more about it.
Does theta ever work in your favor or is it always a negative factor?
Theta represents the daily loss in value of your options. As time passes, options lose value, which is not ideal if you’re a buyer. Unlike binary options, standard options are affected by theta, and this decay accelerates as expiration nears. Successful traders either buy options with a longer duration to mitigate this loss or sell options to take advantage of the time decay.
Theta can significantly affect your trades. As days pass, it reduces the value of options. When buying options, remember that this decay works against you.
On the other hand, selling options can be beneficial. In that case, theta works in your favor, benefiting you as expiration nears.
In short, managing your positions carefully will help prevent losses from theta.
Theta really impacts options right near expiration. Keep that in mind.
I lost $400 on Apple weeklies last year because I underestimated theta decay.
Theta erodes your options daily, especially in the final weeks.
Now, I focus on longer-dated options or sell covered calls to benefit from theta instead of being harmed by it.
Theta shows how fast options lose value each day.
• Buying options: theta works against you
• Selling options: theta works for you
Time decay speeds up in the last 30 days.