Comment on Theta

Ankit commented on 24 Apr 2017, 01:48 PM

Hi karthik sir,
I want your opinion here. What do you say about STRIKE VS TIME VALUE
For an ATM option the time value’s share in premium is maximum and we move to ITM from ATM or to OTM from ATM. The time value starts decreasing and forms a chart like gama (the bell looking) chart
i always thinks that we should not buy optiïon when there is just 10 to 14 days left in expiry because in normal days the movement in underlying stays close to its AVERAGE and THETA beats the DELTA and you always end with lose due to theta
But now with this BELL curve of time value vs strike we can consider buying in ITM and OTM if we have predicted that underlying will move in a meaning full manner and with this we can expect almost same gain as in starting of series where theta is lowest
I mean in above case the decrease is premium will be lower due to THETA campare to increasing in premium due to DELTA if there is noticiable DELTA
if i am doing this trade i wil get out of the trde before expiry for OTM as it has to be ZERO at expiry
So, what do you say is this right thing to do….??????

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