How To Eliminate Options Time Decay When Buying Options

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How To Eliminate Options Time Decay When Buying Options

As soon as you buy a single option time is against you. This video shows how by selling an option against the option you buy creates a vertical debit spread in which Theta or time decay is no longer working against.

By buying a debit spread instead of single option, you give yourself more time for your directional thesis to play out.

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Comments

Jose Garcia says:

that was sweet…I like it…..

Devel Team says:

If the extrinsic of the call you sell is => than the extrinsic of the call you buy, haven't you dealt with the time decay?

Harry Tanumiharja says:

How about buying expiration around 1 year (LEAPS) to eleminate Theta, what do u think?

Irene Lye says:

HI thanks… What about Implied volatility ?how is that affected in a spread? thank you very much

orkayen says:

Thanks for the info. But, when we buy the option, we buy at anticipating a bullish run. When we buy debit spread to negate the time decay, your max profit is limited to the strike difference. If you buy debit spread at ATM, you might get some improvement in the profit but nothing compared to the profit when it is on a bullish run. I agree with you that there is a $ decay that we need to consider but it appears that (based on the open Interest for ITM options) there are lot of people who buy DITM options. I wonder why and how they make money?

Coach Abhi says:

Bit confusing. It's not clear what strike call is sold.
It should be earning equal to or more than 6 dollar per day to counter the theta decay of 232 call.

Please explain

Charles Brown says:

Wish you would've gone through the mechanics of actually putting on the trade. I guess I can use on demand to see how this would be placed.

David W. Johnson says:

….or buy 60 + days

Steven Rogge says:

Quick and straight to the point. Thank you…

orkayen says:

If we follow debit spread, we are limiting our returns, though. The max what you get is the strike width irrespective of the stock's movement. If you are bullish on a stock then isn't it better to go for 70 delta naked call option to gain max profit?

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