On this episode of Trading For Newbies, Ryan and Beef explain how the passage of time impacts our options trades, whether our position is being long or short the option.
Option prices have a time component known as extrinsic value. As we approach the expiration date of the option, the extrinsic value of the option's price begins to decrease and this is known as theta decay.
When we buy options the passage of time and subsequent theta decay works against us, but when we sell options, it works in our favor.Episode Contents
- Intrinsic And Extrinsic Value
- How The Passage Of Time Impacts Options Prices
- Time Is On Our Side When We Sell Options
About Trading For Newbies
This series will educate you, the beginning trader on the basics of options trading and the tastytrade approach to trading. Our goal is to get you to the point where you will be able to actively find opportunities in the market, enter and exit trades, and clearly articulate what you are doing throughout the process.