The only way the option becomes worth more than $5 again is if the price rises above $1,155. This would give the option at least $5 in intrinsic value ($1,155 – $1,150 strike price), offsetting the loss due to theta or time decay. Your position is net bullish from the puts and net bearish from the calls. This type of neutral strategy profits the most when a stock stays flat, not closing too much higher or lower than your strike prices depending on where you set them.
A put credit spread entered with 60 days to maturity may not seem to be impacted by time decay initially, but theta burn will increase over the life of the trade. More specifically, a put credit spread with 45 days until expiration may have a positive theta burn of 0.01 ($1). An iron condor with 45 days until expiration may have a positive theta burn of 0.02 ($2) because two sides of the trade are decaying simultaneously.
In Parts Two’s discussion of theta by position type, the slightly positive theta of a put credit spread or call credit spread may not have seemed super exciting. A day, $5-wide put credit spread with the short put at 0.15 delta probably has a positive theta of 0.01 ($1 in notional terms) because the short put’s theta is slightly higher than the long put’s theta. This $1 doesn’t seem too exciting until you zoom out and think about a portfolio of similar positions.
You can be aggressive when it comes to setting your credit spread, but don’t be too greedy. The first two theta strategies are great for Beginners and seasoned traders alike because your max loss is limited and you know exactly what that max loss would be. Yet at the same time, you can profit from these trades if either A) the stock moves in the direction you like, or B) enough time has passed and time decay has worked its magic.
In a nutshell, intrinsic value resembles the actual worth of an asset. A rather complicated financial model is used to calculate this metric instead of utilizing the actual market price of an asset, but we won’t cover that here (computers do it automatically for you anyways). On the other hand, the difference between an option’s market price—called the premium —and its intrinsic value is measured by extrinsic value. Theta, and your awareness of it, is much more important than gross profit vs ebitda you might have otherwise assumed and is most certainly a driving force for positive returns in an options selling portfolio. However, I try to maintain a balanced portfolio (portfolio delta close to 0), increase portfolio theta to create a theta tailwind, and keep an eye on cash reserves for volatility protection and future opportunities. Therefore, days of muted market movements can cause significant decreases in portfolio value as theta and vega decrease simultaneously.
Options of stocks with high volatility usually have higher theta (on the negative side) than stocks with low volatility. The explanation for this is simple – those options have a higher time value premium, which means they naturally have more to lose every day. Due to the fact that options may only be exercised for a limited time, theta is used to quantify the risk that time poses to an option.
Theta represents the effect time decay has on the value of an option. The rate at which options contracts lose value increases exponentially as options approach expiration. Theta is the amount how to exchange coin the price of the option will decrease each day. An iron condor has out-of-the-money wings, so the most time decay occurs when a wing’s probability of ever becoming in-the-money decreases.
The table below shows all exchanges where you can buy Theta Network (THETA) crypto, such as Binance, BingX, Upbit, etc. For some exchanges there is a depth percent that shows how much liquidity is available, live bids two percent up or down from the current price. The list is sorted by 24-hour volume and CL trust rating, and different pairs are listed separately with the corresponding volume. Just remember to set it up as a short iron condor, making sure you’re getting a net credit on the trade (from both the put spread and call spread).
For out-of-the-money options (~0.30 delta), theta increases as the time until expiration decreases, but the rate of change is less than the at-the-money options. If all else remains equal, the time decay causes an option to lose extrinsic value as it approaches its expiration coinbase delist gyen date. Therefore, theta is one of the main Greeks that option buyers should worry about since time works against long option holders. This one is my favorite theta gang strategy, and especially because I put on these trades on stocks I’m willing to buy and hold anyways.
Binance also lists a very large number of other cryptocurrencies, so you will have plenty of trading options in addition to Theta Token. Calendar spreads work differently and target the theta’s tendency to accelerate as the option approaches the expiration date. The trader sells a short-term option in this strategy and buys a longer-term option, preferably of the same type. With 17 positions, the portfolio theta is approximately 0.17 ($17). The $10,000 portfolio has a positive theta burn of $17 per day.
To avoid this, I’d recommend estimating the yield of your credit spread based on how much capital you’re risking AND how long your capital is tied up (the expiry date). If it’s too small a yield, either don’t take the trade, buy a cheaper put, or sell a more expensive put. For example, strategies that start at-the-money, like iron butterflies or straddles, have greater theta burn at different points in the expiration cycle than an iron condor. This is because the short strikes of the inside wings on an iron condor are near or at-the-money and have higher rates of theta. Similarly, with two different contract expiration dates, calendar spreads will see the front-month contract decay faster than the back-month contract. Whether the calendar is a long (debit) or short (credit) spread significantly affects theta.
The buyer has the right to purchase or sell an underlying stock at a set price by a specific date under an option contract. Admittedly, it’s a bit more complicated than simply a positive or negative theta. Days until expiration, delta, and volatility’s impact vary for different strategies. As a result, theta’s impact on an option’s value varies depending on the type of strategy selected. When you remember that option prices tend to decline over time due to time decay, you really put time on your side and generally increase your chance for a profit the farther to expiration the options you sell are.
You can basically use debit card, credit card, or even PayPal to buy the THETA (or any other cryptocurrencies). It’s not like you pay with cash and you get the THETA as the exchange. We also gather additional information from different sources to ensure we cover all necessary data or events.
In either case (down or even), you essentially keep your premium and that’s your max gain (if the sold call expires worthless). This is a spread where you are bearish instead of bullish, and so you sell a call instead of a put. Selling a naked call can be very dangerous because your potential downside is infinite if the stock runs up, and so that’s why this call credit spread includes a protective call to limit that downside risk. That about sums up a basic explanation on the put credit spread, and the call credit spread is basically the same thing but on the call side, with a few minor important details. I hope you’re not too intimated by the breadth of this section to continue on to the rest of the 3 theta gang strategies, but I promise they’re not as intensive.
We know that it can often be hard to choose when to buy and when to sell, but we can assure you that it’s always a bad idea to be greedy and ask for more than you know you should. You know the saying – a bird in the hand is worth two in the bush. We’ll leave this categorization for now – but we’ll mention it again in another paragraph since it’s relevant for different theta trading strategies. Time decay affects only the extrinsic part of option value as it approaches the expiration date.