Best Practices

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Taking Advantage of Time

Best Practices

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

Options expire. Because of this, time remaining is of great importance.

Theta is the rate at which the premium on the option decreases over time. The more time available, the greater the premium.

Larger thetas, along with greater premium levels, coincide with higher implied volatility environments.

Additionally, the rate of an option’s decay increases as we near expiration.

We can extend theta by rolling tested positions; studies have shown that this has a positive impact on both profitability and probability.

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