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Overview of Theta

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Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

Theta is the change in the value of an option when one day passes, all else equal.

Theta has three key components that are explained in depth in the slides:

  • Theta is not constant over time
  • Theta changes value when the stock price changes
  • Over time, being short options and collecting theta, rather than being long, has been the profitable strategy.

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