## Comment on Theta

1) Think of this as buying a stock at 120 – you will be profitable the moment it crosses 120 right? Likewise with option premium. Now, given the fact that the delta is 0.5, this implies for every 10 points move in the underlying, your premium will move 5 points. Hence for a 50 points move in the underlying, you will make 25 points and your premium is like to hover around 145 (assuming all else equal).

The theta is best looked at an EOD basis and not during the day.