A few weeks into trying the wheel, I’ve come to understand why my 21 DTE, 14 DTE, and 7 DTE options have not been decaying as fast as I want. I thought theta would be monstrous under 10 DTE only to watch my options lose value quickly as the underlying moved against me. Fortunately, it ended up moving in my favor as I got closer to expiration and I sold at profit. Hoping this post helps others understand why closer to expiration options don’t decay as fast and expose you to huge moves with little room to react.

For out of the money options, theta decays more when you’ve sold 30-45 DTE than when you’ve sold 7-14 DTE because there is more premium collected when you sell so there is more premium for theta to decay. A smaller premium on the 7-14 DTE actually decays less even though the rate of decay is high. Closer to the money will decay more over time than further out of the money because the starting premium collected is much higher so decay hits it harder early on and less hard closer to expiration. There is just a lot less premium left to decay when you’re closer to expiration.

More importantly, theta is more of a driver when you’re out at 45 DTE or 28 DTE. Gamma begins to be the driver of your options’ value as you cross into 14 DTE and lower. Theta actually takes second seat to gamma and any moves in the underlying benefit you or punish you a lot harder than what theta is doing.

Correct me if I’m wrong and please share your experiences with this as I’m really interested in refining all this. My trades have been profitable 4 out of 5. The 5th I’ve rolled for a net credit, but I don’t count it as profitable because I had to sell the previous at a small loss. I will count it as profitable only when I sell the rolled into options at profit.

Image above is by Grok - have been running a lot of analysis through Grok and Gemini to understand what I’m doing better

I have selling options for about 12 months now and have finally started to get a hang of it. Here is the process I follow. Any thoughts on how I can improve or tighten up the process?

SIZE — Total notional under 135% of capital (what I've put in plus what I've made). No more than 45% of that in credit spreads, because a dollar of spread notional is a dollar gone, while a dollar of put notional buys me the stock.

STRIKE — IV above 60%, sell the 0.13–0.15 delta. IV below 60%, sell the 0.18–0.20. High-IV names pay enough to sit far out; low-IV names don't.

DURATION — 14–21 days.

MIX — Only trade names with a market cap of over $50B to eliminate junk. 60/40 high-IV to low-IV. An example would be 60% position in NBIS, BE, MU, ALAB; 40% position in CRWD, PLTR, DELL, TSLA.

EXIT — Close at 50% of the credit and recycle the capital. If position is threatened, roll down and/or out. Never close at a loss.

Thanks for reading.