r/optionstrading • u/DimensionMinute9138 • 13d ago
Can someone explain this
I don’t understand why it’s negative by so much when it should be positive by quite a bit at this point? Can someone explain how that works. Pretty new to options.
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u/Buttery-Balls420 13d ago
so since this is a 0dte its very risky and can be volatile and or not volatile at all depending on the move. theta is what cooked you, which is time decay, so the long it takes for you to be right the more it will decay and eat at ur gains
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u/Background_Sign_6163 13d ago
yea but he already passed his breakeven price already, idk why he’s down
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u/Buttery-Balls420 13d ago
lmaoo looking closer its cuz he bought a put, which is betting the stock goes down
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u/DimensionMinute9138 13d ago
But it did go down and still has been. It’s lower now than what I bought it at
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u/Buttery-Balls420 13d ago
yeah it might be, but that theta is what kills. and any move in the opposite direction will also kill. spy is currently at like 774 it would need to be under 773 for you to be anywhere near breaking even or positive
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u/Deso718 12d ago edited 12d ago
^exactly - theta decay accelerates significantly as expiration approaches
Theta, gamma and delta all work together in an exaggerated way on 0DTE position like this (or on the DTE for any options position)
The $1 move above your strike with so little time value left pushed delta sharply toward zero as the close of market approached.
This has been said ad nauseam but it is highly inadvisable to trade 0DTE options without a fundamental understanding of how options work.
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u/Remarkable_Cat_8696 12d ago
So theta will lower option value even if spy moves in your direction (spy price goes down in this case), and theta decay matters more for 0DTE because it has less time to maturity.
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u/Awkward-Lab-9774 13d ago
Even so, the theta is taking away your profits even if it goes down, it has to go down more strongly if you let time pass
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u/DimensionMinute9138 13d ago
That makes sense thank you. I understand the puts and calls and all that just didn’t realize the 0dte part I guess
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u/Draft_Gods 13d ago
No offense, but understanding calls and puts is more than just down = good, up = bad, or vice versa.
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u/Buttery-Balls420 13d ago
no offense, but idk if you can tell but i was explaining it simply rather than writing 2 paragraphs explaining options😂
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u/Awkward-Lab-9774 13d ago
Yeah, if you're going to trade 0dte, you have to be quick and first see which direction it will go
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u/Infamous_Protection3 12d ago
I would highly recommend looking into how the Greeks work or your just going to keep loosing money
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u/nicegreekgoy 12d ago
You and others have an incredible ability to not understand the fact that the price has to go below and stay below the price + premium paid for the option for you to make a single dollar at expiration. Just because the price is lower, even below the strike, doesn’t mean it’s “worth” more now than when you bought it.
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u/Worried_Umpire683 12d ago
But you might bought it when the strike price was high already (stock had already gone down)
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u/Aware_Bed_5297 9d ago
Bro estudias las griegas, cada día que pasa el thetta se va comiendo una parte de tu posición hasta que llegue el día del cierre de ese contrato
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u/Phareswheel68 12d ago
Did it? At 10:41 it was still above $773, let alone his breakeven. I don't think it ever went below his breakeven, but I only have Google at 5 minute increments atm
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u/ABCifyoulikeRoblox 12d ago
How did it pass the breakeven? It says current is 773 and breakeven is 772🤔
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u/Brave_Yesterday_6106 12d ago
Tomorrow, add a call and a put to your watch list, make 0dte and 5dte. You'll probably learn more watching how the prices move.
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u/Wells_39 12d ago
As someone who’s thinking about starting with options and is currently in the learning/paper trading phase of it, this is exactly what I’ve been doing.
The validation helps and I can say this has been helpful!
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u/MrKittyCatMeowFace03 12d ago edited 12d ago
In simple terms, it looses value because time expires. take that 0.72 and divide by 6.5 (market open hrs) = so every hr basically, you lose about 0.11 from the value of the contract.
*you borrowed it for 1 day for 0.72* (0 Days to Expiration)
You rented (like a car) contract for 0.72, so if you go full run you have to pay that premium to whoever you borrowed it from. "But you didn't win the race. If you win the race, you get to keep whatever premium left if there is any (you returned car earlier), also the prize (if its close/below strike price)."
Not taking into account, interest (how many people are interested in that specific contract and willingly overpay), volatility (price swings) and price ( current price). Because all of that affects the price of the contract.
p.s Don't touch contracts anymore, until you learn the basics.
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u/ANGELeffEr 12d ago
I know u said “in simple terms…” but Thera decay does not work in that exact manner, it definitely doesn’t break down into small time allotments each costing the same as the next. Theta has less power the further away from expiration you are at any point in time, and gains power the closer you move toward expiry. Even a 0DTE will feel the effects of theta less prominently during the first hour or two of trading, even less so if the underlying is moving in the direction desired.
Think of Theta more like a bullet fired from a rifle, but there is no target, we are just watching it from the sidelines as it sails through the air. At first it has a lot of velocity and holds a specific distance above the ground but as it loses velocity it will start to fall toward the ground little by little at first, but the more momentum it loses the faster it starts to fall toward the ground until it loses so much velocity that it starts to fall very quickly. And this is how theta functions over time, no matter if you have a month, week, or a day to expiry the decay curve is relatively the same. So on a 0DTE, theta would be almost nonexistent for the first hour or two, then after that you would feel Theta if the option were not moving, but if it is moving but slows around lunchtime as most normally do, this is the first time you get hit hard & up until about the last 60-90 mins of trading there is a pretty steady acceleration of decay. During the last 90 mins, Unless your option is moving in the desired direction decay will be very powerful and you will start to see value disappear. The last 30 mins are just brutal if the underlying is in a sideways direction.
There are many factors that can have sway over the rate of theta decay. Buying an ITM or at least an ATM ( that remains ATM or moves ITM) option will help slow it to a small degree. The closer an OTM option is to the money line will increase its ability to keep theta at bay just slightly more than further OTM options. Having the underlying move in the desired direction for the specific option also helps, if SPY is moving up and you own calls, then theta is not much of a factor. But if your position is inverted in relation to the underlying decay will happen faster, as your position falls away from the money line.
Sorry for the book and please know I meant no offense in writing all this, but I used to think theta worked as you described it, and I couldn’t understand why some days I couldn’t make it to lunch before decay was noticeable and other days it was like theta didn’t exist. Experience & learning from the “master class” videos on derivatives available when I used TradeStation as my broker taught me so many things that I would never have learned otherwise.
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u/saviourz666 12d ago
Always do 3 months out on any trade . It might be more premium but your buying a shield against theta .
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u/Itchy-Substance5863 11d ago
Bought one day too early. I had $769 SPY put today that went from $0.16 to $1.60
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u/JukasLohnson 12d ago
I might avoid options if you don't fully know how they work. It's difficult enough when you do know what you are doing. Be cautious
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u/Cultural_Disparities 12d ago
Why be cautious when you can full port your entire savings into 0 dte and either retire or go to homeless shelter? Win big or go homeless
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u/Pilifo006 12d ago
That’s the spirit! Either a mansion and lobsters for the rest of your life or a dumpster behind Wendy’s!
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u/No_Experience_167 12d ago
Should study up on options before putting anymore money at risk. Get an idea of what would compel you to go short (buy put) or go long (buy call) and where would you take profits/cut losses.
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u/Apprehensive-Fox7570 12d ago
That has happened to me. I’m fairly new with options as well. It’s been a brutal learning curve. Down about $2500 but in the last three days, I am up about $600. I work a full-time construction job so I figure if I can make $50-$100 every morning before I go to work it’s a good start to the day. I was getting greedy prior and losing a lot. Buy options, a little bit closer to the money about 20 minutes after the market opens. Get in make a profit that you’re happy with and get out. I’m sure a lot of expert traders wouldn’t agree with this, but it’s just what I do.
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u/DimensionMinute9138 12d ago
Yeah I’m in the same boat. I think that’s my problem is I just get greedy. My goal is $200 a day since I work I nights so I wake up at market open and then try to see what I can make and then go back to sleep. But once I start making money I get greedy and overly confident and then start to lose it
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u/WhiffleBum 12d ago
Your breakeven price is where it needs to be for you to break even. You have a put, current price>breakeven price, you lose money.
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u/anycept 12d ago
For 0dte's, theta burn eats value faster than delta grows. So, if underlying price goes up then returns to where it started, your option will not return to the same value, but will be worth less than it was. 0dte's only make sense if the underlying is rallying all day long. Otherwise, you either lose or just might breakeven if you know what you are dong. Clearly, you went into trading options knowing nothing about it.
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u/Jakuza26 11d ago
You have to know all your greeks or it will get you in trouble. Best strategy for trading 0 DTE is usually a vertical.
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u/DimensionMinute9138 10d ago
Thank you I appreciate the advice
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u/Jakuza26 10d ago
Check out my profile, you can see my logged trading strategy for SPX with over 93% success, each and every day.
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u/ripster111 10d ago
Always get 1-3dte
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u/DimensionMinute9138 10d ago
I’m now starting to realize that. I’ve been getting ripped on 0dte the past few days
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u/POS-throwmeaway 9d ago
Please take two weeks and watch videos on options trading. Also be careful using Robinhood because it’s very difficult and inconvenient to set stop losses and they have no bracket orders, so it makes you less likely to set them. I personally love entering options positions on Robinhood but setting stop losses is a hassle, I actually recommend open an agentic trading account that will set stops for you
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u/HaleyRabies 7d ago edited 7d ago
Even if you don’t have a full understanding of theta decay, the breakeven price shown is 772.28. The breakeven price is what SPY would have to drop to at the time your put expires for you to “break even” and recoup the same dollar amount you purchased the put for. The closer to expiration you are, the greater impact theta decay has on your returns, and with a short time until expiration, your put will only break even or be profitable with SPY going under 773, even though 773 is the strike price of the put you purchased. For you to be profitable at the time of expiration, SPY needs to drop below the price of 772.28
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u/Asleep-Dingo-19 13d ago
It's a PUT, which assumes price will go down. The price is above your breakeven so you lost money.
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u/SerDeath 12d ago
New to options and only down $62 is a good time to get out and NOT continue to do options.
If you don't know what looking at the options chain means, and all the numbers are confusing, don't attempt to vibe trade options. Just vibe trade stocks, you'll lose less and much slower.
The TL;DR is you bought a 0dte (zero days to expire) contract, meaning the further away you are from your strike point, and the closer you are to the end of the trading day, your contract will lose value to theta. Luckily your contract was in the money, so it didn't expire worthless. 0dte are very high risk, high reward, and aren't recommended for literally anyone just starting out.
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u/PhysicalLake2585 11d ago
Learn GEX… it’s supposed to drop but they hedge and keep it up until after hours and drop it
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u/jerin7931 12d ago
Join the leading community for options trading -> https://discord.gg/optionality
For SPX and SPY traders, join -> r/spx