Part 11 Trading Master Class

Role of Time and Volatility

Two critical forces dominate option trading:

Time Decay (Theta):
As expiry approaches, the time value of an option erodes. Option sellers often benefit from this decay, especially in sideways markets.

Implied Volatility (IV):
IV reflects market expectations of future price movement. High IV means expensive options; low IV means cheaper options. Buying options in low IV and selling in high IV is a common professional approach.