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The Skinny on Options: Abstract Applications

Tasty Decay

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.

Whenever we see a decay curve presented for how option price premiums decrease over time, we are almost always presented with an ATM decay curve. This is all well and good, but the reality is for tastytraders, most of our situations will not be ATM - they will be OTM or ITM.

And interestingly enough, when we study these decay curves, we see they both lead us to the same conclusion: managing our undefined-risk positions at 21 DTE.

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