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Option Decay: ATM vs OTM

Market Measures

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

Options decay differently depending on whether they are at-the-money or out-of-the-money. ATM options decay faster after the 21 DTE mark, but they have more gamma risk, which we prefer to avoid. OTM options actually decay much less after the 21 DTE mark, so we prefer to redeploy capital in a new trade for larger decay.

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