Theta, Part 2 - This is the Income!

Hans Albrecht
12 hours ago
4 min read

Let's dive in!

Part 2 – Knowing When Theta Helps You (and When It Destroys You)Welcome back. Yesterday we talked about Theta like it was melting ice cream.The “Decay Curve”: Why Options Don’t Melt Smoothly

Most people think option decay is straight-line:

Day 1 → lose a littleDay 2 → lose a littleDay 3 → lose a little

Easy, right?

Not even close.

Real Theta acts like this:

Slow melt (when you’re far from expiration)
Medium melt (as you get within ~45 days)
FAST melt (in the final 30 days)
INSANE melt (final 7–10 days)

The closer you get to expiration, the more the option “panics,” because it’s running out of time to be right.

OTM Options Have a Weird Behavior

Out-of-the-money options decay in a more linear way:

They melt pretty evenly for the first 30–60 days, unlike at-the-moneys
Then the melt slows down
Because at some point they get so cheap that market makers won’t sell them for less (too much risk for too little reward)

This is why cheap OTM options don’t go to zero the way beginners expect. But they do collapse a little more quickly, especially if things get quieter and relative option pricing falls (the implied volatility).

They act like insurance:

You want them cheap
The seller does NOT want the margin riskSo a little value sticks around, but only at the end. And that's part of why I like closing them when they get down to nothing. Why battle it out for an extra 10 cents, know what I mean?

Review: High Volatility = High Theta (TSLA options versus PFE)

This part shocks most beginners:

When volatility goes up:

Option prices go up
Which means time value goes up
Which means Theta (the daily decay) goes up too

A jump in volatility can take Theta from 45cents to 110cents, just like that.

But you don’t see that decay until volatility stops rising.

This is what trips up people who don’t understand volatility.

You just took a Vega hit. And now the Theta should start doing its thing again.

Remember Ferris Bueller? Life happens fast. Well in options, Vega happens fast, Theta is the pain drying part.

Why Pros Use Theta in Strategic Trades...

Some examples:

Iron Condors: low gamma, long theta, lots of "juice" between 85–25 days
Calendars: built specifically to exploit differences in theta between expirations. I don't love 'em. Bit of a waste of time.
Selling premium during calm periods: letting time do the work
Buying options when you expect a move FAST: accepting theta decay for gamma and directional juice

Every trade is basically asking:

Do I want time to help me… or hurt me?

And that’s where most traders get it wrong.

Because they don’t actually know. Buying cheap options just because they're cheap is a recipe for disaster. I've seen fellow market makers get DESTROYED thinking that right before a one month lull in markets.

And selling options just because they're much more expensive than a week ago... that's dangerous too. Want to sell house insurance with a hurricane bearing down on you? Be my guest.

There is SO much more to it.

You need way more insight than that. So How Do You Know? I'll tell you how I know.Most traders guess.Pros don’t. No guarantees on anything, but pro ignore the noise. Ignore the noise on CNBC. Ignore the noise from their neighbor's brag about that last killer win (he didn't brag about the account he blew up in April).

Pros look at:

Fundamentals
Volatility and term structure
Skew
Sentiment
Technical momentum
Relative strength
Cross-asset signals
Regime shifts
Direction of movement and volatility
And how Theta behaves under each market condition

But you don’t need to have been an options market maker, options arbitrageur and an income fund manager (me, me, and me for 3 decades).

You don’t need to analyze curves by hand.

You don’t need to have Greek spreadsheets plastered all over your wall like you're trying to crack a 20 year-old cold case.

Because:

Turbo Trader PRO does all that for you.

Even if you could jump into my head to learn the art and science of a 3 decade pro....and that's a big IF...do you really have time?

Ever notice how most income pitches say "Learn to trade income in 1 hour a week?" You won't. The VAST majority of those services are BS. That's why traders end up here. Turbo Trader is the turning point.

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Fundamentals
Sentiment
Volatility metrics
Term structure and skew
Technicals
Relative strength
Money flows
Option regime shifts
and much more...*No guesswork. Rules and guardrails. Eject Button methodology. When to get in. When to get out. When to get greedy. When to sit on your hands.*

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There is nothing like it on earth, period.

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Pro. Big time stuff. No BS. Trade smart, stay hedged.

– Hans👉 The full Turbo Trader PRO product page is now open.P.S.The Black Friday price of $2,987 for one year of access (regular $7,897) is still on, sort of. And then by the new year.... $7897. Trust me, I know a total schmuck who does something 10% as good who quit his full time clerical job 3 years ago to be an options "expert". $9000.