Day Trading and Time Decay

Discussion in 'Options' started by goathed1, Jan 21, 2012.

  1. goathed1


    Time Decay (theta) has an affect on the options price as days pass but what if you are only holding the option for 4 to 6 hrs? Do you still lose money on the option if you are opening and closing your position the same day ie. day trading? Weekly expirations vs. expirations with 30 to 60 days remaining?
    Thanks for your response.
  2. Isn't this something you can watch and determine yourself?

  3. spindr0


    Bigger concerns than intraday decays are the B/A spread and commissions. And then there's that little problem of getting the direction wrong and losing a chunk of premium.
  4. +1. this can be mitigated if you only trade the highest volume options (e.g. spy, aapl) and use a broker w/ low commissions like ib.

    also if you're trading intraday make sure you buy higher delta options to participate in more of the move.
  5. From my experiance, the simple answer [without trying to guess your trading strategy and assuming you understand the impact of delta (yes, you need to get the direction right) gamma (and sometimes direction is not enough) and vega (volatility is your friend if you are a buyer) and Bid/Ask spreads] is Yes, you are effected by theta.

    When I used to trade straddles (buying option contracts) I remember more often widening my loses as the day went by as long as no major movement was present.
    With iron condors (a short option position) its just the opposite.
    With weekly options the lose will be greater (depending on other Greeks, extrinsic value etc.)
  6. TskTsk


    Yes you will notice some decay intraday, especially in calm markets. It's hard to predict exactly how much the decay will be, as theta occurs rather erradic.
  7. If you get the direction right might as well use futures