Expiration is important because it sets an Open and Close
time frame for your options.
How many days you have left until an option expires
is called Days To Expiration (DTE).
Research has found that PREMIUM ENTREPRENEUR
traders stand the best chance of profiting
with an DTE of 50-120 days.
#1. PREMIUM ENTREPRENEURS:
A.___have an upscale business
B.___place options to move ahead in Monopoly
C.___buy and sell options to collect premium for profit
D.___ are daytraders.
Options are a “wasting asset” — wasting in that with each day
a small amount of PREMIUM TICKS AWAY.
One of the measures of how much a premium will lose each day
is known as “Theta” a/k/a “time decay”.
Your trading platform labels “Theta” with a minus
or plus amount of cents.
#2. Expiration date is important because
A.___that is the date an option is renewed
B.___the contract disappears forever on that date
C.___Theta is a wasting asset
D.___the share price is ticking away.
Date To Expiration is not that scary – just make sure
you close your order before the expiration date
And don’t wait until the last minute; start figuring
it out when you OPEN your order!
Answers: #1 – C, #2 – B
Options are a phenomenal tool. There are tons of benefits you
can’t get in stocks or other investments.
But, like anything, there are things to watch out for —
DTE and Theta are two of them!