Tuesday, May 3, 2016

Theta explanation please.

Can someone explain how the time value decay of an options contract (Theta) affects the profitability of a successful trade? If I understand it correctly, if theta is -2.00 then the value of that options contract will decrease by that amount every day correct? So if I sell an ATM contract for a profit five days after opening that position and my theta is -2.00 my total profit would be $10.00 less then what was expected once I close the position?

Thanks in advance.



Submitted May 03, 2016 at 04:51PM by chiboiler7 http://ift.tt/1X7iOvq

No comments:

Post a Comment