Theta Explained for Beginners: Mastering Option Time Decay

Join Ryan O'Connell, CFA, FRM, as he explains Theta in options trading, guiding beginners through mastering option time decay in the comprehensive video, "Theta Explained for Beginners: Mastering Option Time Decay." Discover the essentials of option Theta, why it's almost always negative, and its impact on option pricing through detailed examples. Dive deep into the intrinsic and extrinsic values of options, understanding how they fluctuate over time for in-the-money (ITM) and out-of-the-money (OTM) calls. Whether you're a novice trader or looking to brush up on your options knowledge, this video provides invaluable insights into how Theta affects different strike prices and moneyness, equipping you with the expertise to make more informed trading decisions. Plus, gain a broader understanding of option Greeks and how they play a crucial role in your trading strategy.
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Chapters:
0:00 - Intro to Option Theta Explained
0:32 - Definition of Option Theta
1:05 - Theta Is Almost Always Negative
1:31 - Example of Theta Price Change Impact
2:18 - Intrinsic Value of Options
3:56 - Extrinsic Value of Options
4:36 - Intrinsic & Extrinsic Value Over Time - ITM Call
6:48 - Intrinsic & Extrinsic Value Over Time - OTM Call
8:29 - Theta at Different Strike Prices & Moneyness
10:07 - Finance Tutoring at RyanOConnellFinance.com
*Disclosure: This is not financial advice and should not be taken as such. The information contained in this video is an opinion. Some of the information could be wrong. This channel is owned and operated by Portfolio Constructs LLC. Some of the links above are affiliate links, meaning, at no additional cost to you, I will earn a commission if you click through and make a purchase.

[@RyanOConnellCFA]

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[@shreyanshsrivastava2204]

Hi Ryan, Your videos are very helpful in understanding these complex concepts in a easy manner. Your teaching techniques is really nice! Can you make some videos on how to price different types of derivatives like FX, interest rate swaps and cross-currency derivatives?