The hidden cost of time and why your option can bleed even in a sideways market
It’s one of the most frustrating things for traders to experience. You buy a call option. The stock doesn’t drop. In fact, it might even creep up a little. But when you check your position… it’s down. Sometimes way down. What gives?
The answer lies in a concept that separates seasoned traders from frustrated beginners: time decay.
Options are decaying assets. The value of your contract isn’t just tied to the stock price, it’s tied to the clock. Every day that passes, your option loses a little bit of value, especially if it’s out-of-the-money or near expiration. This is known as theta, and it can erode your position even when the stock behaves.
So if the stock stays flat, or moves slowly in your favor, you’re still in a losing race against time. This is why experienced traders often choose expiration dates with more time, or structure trades in ways that reduce the impact of theta altogether.
And if implied volatility drops while time passes? That’s a double hit to your option’s price.
Bottom line: your option can lose value even when the stock is “behaving," because options aren’t stocks. They’re time-sensitive contracts. Knowing how and when to enter, and with what kind of time on the clock, can make all the difference.
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