Been hearing about theta decay a lot lately but don’t really understand what it means.
Saw some traders talking about how theta affects their positions over time. Is this something I should worry about when holding options?
Trying to figure out if time is working against me when I keep positions open.
Lost $400 on Apple calls last month because I completely ignored theta.
Theta shows how much your option bleeds daily just from time decay. Apple stock didn’t even move, but my calls still dropped $15-20 every day.
Now I check theta costs before holding anything overnight.
Theta reduces your option’s value daily if you hold it too long.
Theta decay hits harder the closer you get to expiration. Your options bleed value every day, even when the stock doesn’t move. You’ve got to act fast to beat that premium loss. Short-term options decay way faster than long-term ones. Best time to trade is usually the first third of an option’s life - after that, theta cranks up and starts eating your investment alive.
Time decay impacts options buyers daily, worsening as expiration approaches.
Theta indicates the amount your option will lose tomorrow if there are no other changes. For example, if theta is at -0.50, you’re losing 50 cents per contract each day.
Weekends can be hard because theta continues to apply even when markets are closed.
Sellers gain from theta decay. Buyers lose.
• Options depreciate daily regardless of stock movement
• Decay accelerates in the final month
• At-the-money options face highest theta impact
Evaluate theta versus potential profit before trading.