Strategy
The Theta Decay Curve
Time decay is not linear. Understanding this curve is the single biggest edge an option seller has.
The 30-Day Cliff
Most beginners assume an option loses value evenly each day. It does not.
Theta decay accelerates exponentially as expiration approaches. The last 30 days see the most rapid destruction of value.
For Sellers (Us)
We want to sell options 30-45 days out to capture the start of the acceleration.
For Buyers
They should buy 90+ days out to avoid this curve.
Option Value
Time to ExpirationDays Remaining
The "Sweet Spot" Strategy
We use the Greeks to define specific rules for entering and exiting trades.
1. Entry Timing
Sell options with 30-45 days to expiration.
Why? Maximizes premium vs. time ratio.
2. Exit Goal
Close the trade at 50% profit.
Why? Avoiding the "gamma risk" of the final days.
3. Management
If not profitable by 21 days, roll or close.
Why? Don't hold losing trades into the danger zone.