From Theory To Practice

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Good Theta/Bad Theta

From Theory To Practice

Simply put, when we’re out-of-the-money, long options have negative theta, as the option buyer needs the underlying stock to move in their favor to benefit. Short options have positive theta, as the option seller does not need the underlying stock to move in their favor to benefit. As tastytraders, we already know all of this. But today, we ask the question – could we have a situation where we’ve actually created more positive theta, but it’s not necessarily a good thing? James joins the discussion to help us expand our knowledge base as beginner traders and answer that very question.

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