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TLDR: Knowing how time decay works, the rule of thumb that I used for choosing an option's expiration date is: 1. If I'm selling an option, I choose an expiration date that is around 30 days. 2. If I'm a buyer of an option, I choose an expiration date that is more than 1 year.
Story time
If you do not know what an option is, do read the Explained Simply: Options series here
In the market, there aren't many things that are guaranteed....
Story time
If you do not know what an option is, do read the Explained Simply: Options series here
In the market, there aren't many things that are guaranteed....
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1. What factors do you consider when deciding an expiration date (ED)?
I choose ED based on Theta (time decay) and my risk appetite. I prefer low 'calculated' risk hence my ED never exceed 2 months.
2. Have you ever used a longer or shorter expiration date than you originally planned? What's your outcome?
No. I'll follow my ED strictly to aviod emotional trading (greed and fear). I prefer to trade long options hence my maximum loss is limited - jus...
I choose ED based on Theta (time decay) and my risk appetite. I prefer low 'calculated' risk hence my ED never exceed 2 months.
2. Have you ever used a longer or shorter expiration date than you originally planned? What's your outcome?
No. I'll follow my ED strictly to aviod emotional trading (greed and fear). I prefer to trade long options hence my maximum loss is limited - jus...
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For me, I normally sell put and I will choose 3 or 4 week most. Already need to check the IV. if IV is high, I may choose not more than 3 weeks to min. the risk for being assign.
Selecting the right expiry dates is a crucial step in my options selling strategy. My main objective is to take advantage of something called "theta decay". This is simply the expected decrease in the value of an option over time.
Each option comes with a "delta" value. Think of it as a barometer of the risk you're willing to take on. If you're dealing with options that have a delta between 0.25 and 0.30 (which reflects a moderate risk level), I'd suggest you set an expiry...
Each option comes with a "delta" value. Think of it as a barometer of the risk you're willing to take on. If you're dealing with options that have a delta between 0.25 and 0.30 (which reflects a moderate risk level), I'd suggest you set an expiry...
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I usually look at various things like delta along with strike and expiration... In my opinion the biggest catalyst is volume... I don't look at the rate of decay as much anymore, because I feel like if you have a stock that is volatile and running in your favor it shouldn't matter much... any insight welcome!
My two biggest factors to select an expiration are based on the following:
ATR - average true range, how much does the stock move on average over the prior 14 days? based on this how many days would it take for a selected strike to be ITM (in the money), select an expiration at least double to ensure it has plenty of time for turbulence.
Trend/cycle- does either the sector or ticker have a recurring pattern, and is it clearly in either a peak or trough? How long is a typical cycle? select an e...
ATR - average true range, how much does the stock move on average over the prior 14 days? based on this how many days would it take for a selected strike to be ITM (in the money), select an expiration at least double to ensure it has plenty of time for turbulence.
Trend/cycle- does either the sector or ticker have a recurring pattern, and is it clearly in either a peak or trough? How long is a typical cycle? select an e...
How to adjust the expiration date? Want to illustrate my thoughts with an example
Suppose you bought call options on a stock that expire in three months when the stock was trading at $120 per share. You paid a premium of $5 per share for the options, giving you the right to buy 100 shares of the stock at $125 per share anytime within the next three months. This means that you need the price of the stock to rise above $130 ($125 + $5) before the expiration date to mak...
Suppose you bought call options on a stock that expire in three months when the stock was trading at $120 per share. You paid a premium of $5 per share for the options, giving you the right to buy 100 shares of the stock at $125 per share anytime within the next three months. This means that you need the price of the stock to rise above $130 ($125 + $5) before the expiration date to mak...
Consider Your Trading Strategy
Before choosing an expiration date for your options contract, you need to consider your trading strategy. Are you looking to make a short-term or long-term trade? If you're looking for a quick profit, choose an option with a shorter expiration date. However, if you're bullish on a stock and want to hold onto it for a longer period, choose an option with a longer expiration date.
For example, let's say you are bullish on a...
Before choosing an expiration date for your options contract, you need to consider your trading strategy. Are you looking to make a short-term or long-term trade? If you're looking for a quick profit, choose an option with a shorter expiration date. However, if you're bullish on a stock and want to hold onto it for a longer period, choose an option with a longer expiration date.
For example, let's say you are bullish on a...
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Kopikarp : "We can't guarantee that company in distress will go bankrupt" RIP SI, FRC, BBBY
doctorpot1OP Kopikarp: ya usually they will go bankrupt
but some like AMC and GME was saved by apes and retail investors and banks were bailed out by govt 
. So company in distress isn't 100% guaranteed to go bankrupt.
luckme Kopikarp: BBBY's bankruptcy is certain. The shopping malls near my house have already begun selling liquidation products at affordable prices. Cool and clean, the containers are all empty
yejian : I like to sell one-year or 200-day contracts; I generally don't buy options. I usually sell a long-term contract when a certain stock has gone up a lot and I really want to sell it. When a stock that has been coveted for a long time can no longer fall even to a 52-week low, sell a one-year term at a much lower price to pick up the flying knife. What does the master think
doctorpot1OP luckme: the retail investors didn't manage to save this one
doing business nowadays seems to be harder, many seems to be saving more instead of spending
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