Lesson

Theta clock | Options Educator

See time decay chew through premium and rehearse roll decisions.

What you'll practice

  • Run the clock down on the call you hold (option A), toward a week to expiry, until its theta per day is about −$0.120, within $0.010.
  • After "7 days pass", which loses more value: the call you hold (option A) or the same call at a later expiry, the one a roll forward would buy (option B)?

In this lesson

Time Decay Fundamentals

  • Theta is daily time decay in dollars
  • Decay accelerates near expiration
  • Last 30 days = most dangerous for buyers
  • Sellers benefit from theta, buyers fight it

Managing Theta in Your Trades

  • Buyers should use longer expirations
  • Sellers should target 30-45 DTE
  • Weekend theta is priced into Friday options
  • Close winning trades early - don't get greedy

Rolling Options to Manage Theta

  • Roll to extend time when winning
  • Don't roll losing positions (usually)
  • Calculate new breakeven after rolling
  • Rolling costs money - include in analysis

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