| Theta changes with time. If you want to minimize loss of time value, you buy 2 year LEAPs, and then as their 1-year approaches, you sell the LEAPs and roll them back into 2-year LEAPs. Theta rapidly changes as you grow closer to expiration. No one should be buying and holding just one option. Anyone who understands Black Scholes will be selling/buying and exchanging options as time goes on. ------- Buying puts is a bull-bet on Volatility and bear-trade on the underlying stock, while losing Theta (largely based on expectation date. Longer means less Theta decay). Selling calls is a bear bet on volatility, bear bet on underlying while gaining Theta in value each day. And then there are the many combination trades that are available. In any case, I don't think any sophisticated trader does the strategy you are assuming here. The sophisticated strategies involve selling and renewing your options as time moves forward / and or the stock price changes (to keep Delta withing appropriate levels). |