MTM Options Trader Newsletter - What Do You Know About Option Theta?

[image]() [image] This Week in the Market Stocks in the U.S. dropped lower for the seventh week in a row. To put it in perspective, this has not happened since the dotcom bubble burst a couple of decades ago. The strong possibility of a recession, according to some analysts, and a continued slowdown of earnings growth have been two of the major catalysts for the decline. The S&P 500 has not traded at these levels since late February of last year. The major indexes are all well below their 50-day and 200-day moving averages, and implied volatility levels have increased again after sliding a tad lower last week. A non-bullish bias should continue until a bullish rally can be sustained. The notes from the Federal Reserve’s last meeting are expected to be released on Wednesday afternoon. It is unknown if anything new will be revealed especially with several Fed members giving their thoughts in speeches over the past several weeks. Several other reports worth noting are listed below. Quarterly earnings remain slow, but a few big-name stocks like Alibaba, Baidu and NVDIA are scheduled to report this week. Expect another roller coaster ride this week! May 24: New Home Sales May 25: Durable Goods May 25: FOMC Minutes May 26: Jobless Claims May 26: GDP May 26: Pending Home Sales May 27: Consumer Spending May 27: Advance Trade [Read Our Blog]( What Do You Know About Option Theta? What do you know about option theta? For many, it can be the easiest option greek to understand, but for many others it is the most difficult. Let’s take a quick look below and, let’s hope, clear up some confusion. Theta Definition Theta measures the rate of decline in the value of an option due to time passing. Keeping it simple, for every day that passes, theta should decrease the option’s premium by the amount of theta. Long options, both calls and puts, have negative theta. Short options, both calls and puts, have positive theta. How can we use this as part of our option trading? Theta is also highest at-the-money (ATM) and smaller out-of-the-money (OTM) and in-the-money (ITM). [Continue Reading ...]() MTM Watchlist Here are several trade ideas we will be following in group coaching class this coming week: SPY – We have modeled out several bear call spreads on the ETF over the past couple of months, and the way the market continues to look, more will be considered this week as well. COIN – After dropping from $200 at the end of March to below $50, the stock has been able to trade sideways for over a week. More bull put spreads will be considered or possibly bull call spreads with a break over the $70 level. GLD – With a beautiful upward sloping trendline that has acted as support for over a year now, more bull put spreads may be explored, counting on that potential support to continue. [image] We're honored to have Dan's Book Trading Option Greeks listed as one of the [Best Options Trading Books](=) by New Trader U. [Buy Now on Amazon](=) The strategies in this newsletter are for educational and informative purposes only. All information disclosed in this newsletter should not be considered complete in its entirety. Market Taker Mentoring, Inc. will not be held responsible for changes, oversights, errors or omissions. Dates, prices, news and other information may not be accurate. Please verify all information before trading. You alone are responsible for your own investment decisions. Options involve risk and are not suitable for all investors. Before trading options, please read Characteristics and Risks of Standardized Option (ODD), which can be obtained from your broker; by calling (888) OPTIONS; or from The Options Clearing Corp., 125 S. Franklin St., Suite 1200, Chicago, IL 60606. No statement in this newsletter is intended to be a recommendation or solicitation to buy or sell any security or to provide investment or trading advice. Traders and investors considering options should consult a professional tax advisor as to how taxes may affect the outcome of contemplated options transactions. Copyright Market Taker Mentoring, Inc. 2008 - 2022. All rights reserved. Reproducing or redistributing this content is a violation of federal law. [image] If you do not wish to be contacted via email, you can unsubscribe using this link: [Unsubscribe]( Unsubscribing from email notifications DOES NOT cancel your class, subscription or recurring payments. We recommend that current students do not unsubscribe from email notifications. If you unsubscribe from email notifications, you will not be notified on how to access the classes or subscriptions in which you are enrolled. Market Taker Mentoring, Inc. PO Box 117 Frankfort, Illinois 60423 United States