SI
SI
discoversearch

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor.  We ask that you disable ad blocking while on Silicon Investor in the best interests of our community.  If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.
Strategies & Market Trends : Wings-FPT
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  
To: Didi who started this subject8/11/2000 12:38:39 AM
From: Didi   of 124
 
Time decay: OTM, ITM and ATM + "sell short/buy long"

From OAS, p. 13 and CBOE's Options Essential Concepts & Trading Strategies, p. 30-33:

Condensed & edited.

>>>Out-of-the-money and in-the-money options decay in a more linear fashion than do at-the-money options.

Option values are related to the square root of time remaining.

This should give pause to those option traders who resolutely believe in buying only front-month options.

Considering time decay alone, assuming all else equal:
...buyers should prefer to BUY long-term options,
...sellers should have a preference to SELL short-term options,
...there is more profit to be made by selling six one-month options than one six-month option.

But, in the real world, all else is rarely equal. Transaction costs have an impact, and option traders must balance the impact of these real world considerations versus the theoretical<<<.
Report TOU ViolationShare This Post
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  

HomeMailHotSubjectMarksPeopleMarksKeepersSettings
Terms Of UseContact UsCopyright/IP PolicyPrivacy PolicyAbout UsFAQAdvertise on SI
© 2025 Knight Sac Media.  Data provided by Twelve Data, Alpha Vantage, and CityFALCON News