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Strategies & Market Trends : The Covered Calls for Dummies Thread

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To: Kayaker who wrote (1680)	7/31/2001 12:05:25 AM
From: BDR	of 5205

<<Note that the decay of time value is not linear.>> Exactly. Thank you for clarifying that. His options today have $1.69 time premium. There are only 13 trading days left to expiration. At 8 cents a day, everything else remaining equal, only $1.04 of the time premium is accounted for if the decay were to remain constant. Theta (the slope of the time premium decay curve) becomes steeper as expiration approaches. That fact underpins the advice given here before to be a seller of near term OTM options and a buyer (if you must) of longer term ITM options.

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