The Beauty of Options Time Decay
For the option seller there is a definite beauty in time decay. From the moment you sell a call or put, it’s value decreases. The closer to expiration, the faster the value decreases. This is great news for the option seller and not so good news for the option buyer. Options sellers have a built-in casino-like edge. The gradual wasting away of the option they sold makes it increasingly likely that they’ll get to pocket their premium free-and-clear (or at least buy it back at a lower price thus making a profit) as time goes on. Upon expiration day, the 3rd Friday of every month, the option expires and the premium you took in, assuming you did not buy it back, becomes extra income! On the other hand, time decay works against the option buyer. The option they bought, in hopes that it would rise in price, gradually wastes away in value and….well you get the message. Here at Safe Options Trading Income, we believe that conservative options selling is a better bet than outright options purchases, at least in the majority of cases. The major lesson to learn here is that the option seller has a built-in edge that increases the likelihood that she will make a successful option trade. This edge is time decay. There is considerable body of math associated with option time decay. For further study please access the following link: OptionsTradingpedia on Option Wastage
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