What Is Theta In Options? - 3 Amazing Facts About Time Decay in Options
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- Опубліковано 15 вер 2024
- What Is Theta In Options? - 3 Amazing Facts About Time Decay in Options
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When you are BUYING options, time decay in options can suck the life out of you.
But when you are SELLING options, you should forget everything you learned about time decay, because now suddenly THETA is your best friend!
In this video, I'll show you 3 amazing facts about time decay in options.
In short, THIS is "Theta in Options Made Simple: What You Need to Know."
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#optiontrading #TimeDecayOptions #TraidingWithMarkus
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Love your content
Hi JRInTroy, thanks for watching. And thanks for your feedback. Much appreciated. "See you" in the next video 👍
Did you already do a video on IV crush?
Would it be wrong to think of rising volatility as adding more time to the option, and falling volatility as accelerating time decay?
I haven't recorded a video on IV crush. It's on my list of possible topics. ;) As far as the analogy, YES rising IV will increase TIME VALUE (aka extrinsic value) compared to REAL VALUE (aka intrinsic value). But the word "value" is important here...at least to me.
@@rockwelltradingservices Thank you. Your videos have been very helpful.
Especially the one on developing a Trading Plan.
Awesome!
Thank you for watching! :)
Great Video
Awesome! Thank you for watching! :)
Marcus, your heart is into helping us.!!
Thank you! :)
Does the Theta. Time decay decreases during overnight and the weekend? or only during trading hours?
Hi Emmanuel, it decreases over the weekend, too.
@@rockwelltradingservices thank you!
You are welcome! :)
Suppose the stock is, for an unknown reason, falling to 13. Is it possible you will be assignt and you have to deliver the shares ?
If we are SELLING a put, we have an obligation to BUY the shares at the strike price we sell. THIS CAN happen. But based the rules we shared in our Theta Kings class, we try to put the odds in our favor by giving us enough room for the stock to move. And normally your'e not assigned immediately if the stock drops below the strike. It's only if the stock drops much lower than the strike OR the stock is below the strike at expiration.
@@rockwelltradingservices is a vertical spread not better ? of course, the gains are limited
Usually, there's not enough premium if you trade a spread. Often you're only getting $0.15 - $0.25. Yes, you have downside protection, but it come with a high price. The key question is:
1.) Do you want to make $600 with no downside protection or
2.) Do you want to make $250 with $1,000 protection to the downside?
It really depends what trading style YOU like better. I personally prefer the first. Does this help?
@@rockwelltradingservices It helps a lot. Thanks Markus !!
I am glad that this helps! :)
Time decay is everything in options; by not understanding it, one is predestined to doom
Agreed! 👍