Been trading for a while now but still confused about theta in options trading.
I know it has something to do with time decay but not sure how to actually use it in my trades. Do you guys pay attention to theta when picking options?
Sometimes I feel like I’m missing something important here.
Theta shows how much your option loses in value each day. Higher theta means faster decay. Avoid options with theta over -0.10. Consider selling options to profit from theta decay. Time decay accelerates in the last 30 days.
Weekly trades do better when theta is below -0.05 for my strategy
Theta’s the daily cost of holding an option. Each day you own it, that’s how much value disappears.
I check theta before every trade. Buying options? I want low theta so time decay doesn’t wreck me. Selling options? High theta’s great - I pocket that decay.
Match your timeframe to theta. Quick trades need low theta. Longer plays can handle more, but you’re still racing the clock.
Most traders skip theta and can’t figure out why winning trades turn into losers. Build it into your position sizing and exit plan from the start.
Theta can be a real challenge when trading options. It erodes value daily, especially when buying options.
Focusing only on stock movement can cost you.
Aim for options with at least 30-45 days until expiration. This gives enough time to avoid the worst of time decay.
If you’re selling options, theta is your ally. Just be cautious as it can go against you if the trade doesn’t work out.
Theta destroyed me when I first started trading options three years ago.
Bought Apple calls expecting the stock to pop, but had no clue time was eating away at my position daily.
Watched $400 evaporate as a winning trade turned to nothing - all because I ignored theta decay.
Now I check theta first. Too high? I skip it or flip to selling options instead of buying.