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>Push options too long, and all your money decays away. Assume you let all options expire OTM the following still holds: >The premium:payout ratio of such a t

>Push options too long, and all your money decays away. Assume you let all options expire OTM the following still holds: >The premium:payout ratio of such a trade requires him to be right only once in 5-10 years for him to walk away profitable. Minimizing theta exposure extends that duration.

dragontamer 8y ago
If you buy a put option, someone sold that put option to you. Only one of you will be correct, and one of you has theta-decay (while the other person benefits from theta-decay). That's how the options market works. Someone pays theta-decay for the long-tail chance of hopefully being right sometime in the next year or two... while someone else collects that theta-decay over time. Its insurance, plain and simple. Sometimes, the insurance company wins, and sometimes the buyer wins. ----------- But with any trade, there's the other side. If you go long-put, someone else has decided to go short-put against you. Your final bet is that the short-put giver will actually give you the money when you win your bet. And that's a bet within the BTC market I don't believe in. Too many BTC markets have gone kaput, I'm not trusting anyone in this market.
- DINKDINK 8y ago
  Bringing up theta seems to be tangential to your concern: Solvency. Delta & Gamma have more applicability to solvency issues than theta
  - dragontamer 8y ago
    I'm avoiding Delta and Gamma mostly because its clear that you understand those issues. Or at very least, I haven't seen you write anything that warrants me correcting you with regards to Delta / Gamma. Also, Delta and Gamma are the causes of big-swings. So I think most people fear those and give them appropriate amount of respect. Theta on the other hand is the difficult one. Option sellers collect the pennies in front of the steamroller, while option buyers are hoping that they're right eventually. Typical human psychology doesn't really handle this case very well, on either side.

dragontamer 8y ago

If you buy a put option, someone sold that put option to you. Only one of you will be correct, and one of you has theta-decay (while the other person benefits from theta-decay). That's how the options market works. Someone pays theta-decay for the long-tail chance of hopefully being right sometime in the next year or two... while someone else collects that theta-decay over time. Its insurance, plain and simple. Sometimes, the insurance company wins, and sometimes the buyer wins. ----------- But with any trade, there's the other side. If you go long-put, someone else has decided to go short-put against you. Your final bet is that the short-put giver will actually give you the money when you win your bet. And that's a bet within the BTC market I don't believe in. Too many BTC markets have gone kaput, I'm not trusting anyone in this market.

DINKDINK 8y ago
Bringing up theta seems to be tangential to your concern: Solvency. Delta & Gamma have more applicability to solvency issues than theta
- dragontamer 8y ago
  I'm avoiding Delta and Gamma mostly because its clear that you understand those issues. Or at very least, I haven't seen you write anything that warrants me correcting you with regards to Delta / Gamma. Also, Delta and Gamma are the causes of big-swings. So I think most people fear those and give them appropriate amount of respect. Theta on the other hand is the difficult one. Option sellers collect the pennies in front of the steamroller, while option buyers are hoping that they're right eventually. Typical human psychology doesn't really handle this case very well, on either side.