Market Measures

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Days to Expiration | Time Frames

Market Measures

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When we are looking to enter a short premium trade, we will typically do so with around 45 Days to Expiration. We believe that this is where we see the optimal amount of theta decay for the amount of time we are in the trade. While this may be a "gut" feeling, is there any proof of this?

Today, Tom Sosnoff and Tony Battista look to place a 1 standard deviation strangle with 60 DTE, 45 DTE, and 30 DTE. Then they compare holding each of these trades for 30 days to compare the amount of premium remain after this time. The guys find out that the 45 day cycle produced the highest avg. profit and the largest amount of profit per day, thus confirming our belief that the best time to place a strangle is around 45 DTE!

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