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The Skinny on Options: Abstract Applications

More Theta? More Risk

The Skinny on Options: Abstract Applications

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

Everything that we do as active traders can be funneled back to either an attempt to enhance return or mitigate risk. And typically, when we measure risk, we use more traditional metrics, such as implied volatility or standard deviation. However, if we stretch our thinking a bit, we see that Theta itself could certainly be viewed as an indirect measure of risk, too.

As we compare and contrast defined-risk and undefined-risk strategies in SPY, we see this front and center.

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