Comment on Theta

Kinjal commented on 10 Mar 2019, 08:54 PM

Sir,

I don’t understand the following:
1. When you short naked options at the start of the series you can pocket a large time value but the fall in premium owing to time is low
Why is “‘fall in premium owing to time is low’ not advantageous to option seller? I understand the time factor bit.

2.When you short option close to expiry the premium is low (thanks to time value) but the fall in premium is rapid
Why is “fall in premium is rapid’ beneficial to option seller?

Please explain as I am new to this.

Thanks a lot!

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