Cycle Trading

[Duma]

His chart is useless. He plots Theta for 70% OTM and 90% OTM. There is no such thing. 90% of 410 (SPY) would be 41. 165 is the lowest options go.

Ok so I thought the 70% OTM really meant 30% OTM, but that can not be true because theta on a 10% OTM is going to higher than 30%. His chart has 90% (or what I would think is 10%) as the lowest theta. Not true, that would be the 30% OTM.

So I have no idea what kind of option trades he is doing. It certainly isn't spreads because most of the money made is from the option sold ATM that comes just before expiration. The only time one can sell early is if price has moved far away from strike.

So I sold a SQ 205 p on 4/6 for 1.95 when SQ was trading at 226. So that would fit into what TT was talking about where the major part of the decay would come earlier in the cycle. With SQ now at 261, the option has moved to a value of .41, so I have captured 80% of the movement. But why would I want to close out the option and give up another $41 in profit.

So I get his point, but have no clue what to do with it.