Expirations (DTE)

Expiration Dates

All options function on expiration dates
At any time, you can close or roll (change the expiration end date) to stay in the position
Each option has a specific end date as seen on the left. The days (e.g. 41 days) is the amount of time before the option expires. This is known as the Days to Expiration or DTE (e.g. 41 DTE).
At expiration, an option may be exercised, expire worthless, or rolled.
Closer expirations are cheaper than later expirations due to the time (theta) value
Monthly options have a higher open interest and volume

In general, you want to find securities that offer weeklies and not just monthly options. This gives you more flexibility on selecting weekly, bi-monthly, or monthly positions. Additionally, should you need to roll your options for covered calls, this gives you more options to select.

nak's thoughts

Timeframe

Intraday trading, to exit the same day, I will look at the same weekly if it is Monday through Wednesday. If we are on Thursday or Friday, I will often look at the following week. Fridays, I may YOLO on a 0 DTE if I am playing the 1 to 10 minute charts, but I plan to be in the trade no longer than a few minutes to an hour at most.
Swing Trading, I will want to select my DTE based upon the SSS50% reversal if that is my exit and entry
- - If I am looking at a monthly reversal, I would want to select a DTE of at least one month or longer.
  - The exception to this rule would be if the month ends in a less than a few days or a week; then I would select a timeframe that gives me some time after the end of the month.
  - If I am looking at a weekly reversal, I may select the same week up until a week after
  - My major thought is that I want to give myself time for the move to happen, but the longer the DTE the less I lose in theta every day. This may cost me more money to enter a position, but I lose less if the move takes longer.
Covered Calls (CC)/Cash Secured Puts (CSP)
- - This is a matter of opinion. For those who want to maximize their profits, selecting weekly DTE can reap far greater returns than monthly DTE.
  - For those who want to minimize their management, selecting monthly DTE offers consistent returns.
  - Regardless of your strategy, consider your ROI and breakeven for your position. At a minimum you should look for a 2% return on your CC or CSP .
    - - 2% a month equals 24% return on your investment
      - If using weeklies, attempt to get an amount greater than 0.5% (2%/4=0.5%); otherwise you may as well select a monthly DTE to get a bigger premium
      - In theory if you could attain 1% a week, you would earn 4% a month or 48% of your initial investment. If you do this for several years, you would have enough money to to do another CSP or DCA into shares to get another CC.
Spreads
- - Most spreads (iron condor, butterfly, broken wing butterfly, straddles, strangles) will call for 30-60 days, while others will argue 35-45 days is the sweet spot. At 45 days, it offers a decent amount of theta value, similar to
  - In most of these spreads, we are:
    - - Looking to close our position once we hit 50% of the maximum profit potential; closing early increases our win ratio and profitability. There are some strategies that say 75%, but in general we will look towards 50%.
      - Hoping to profit from theta decay (time) and a decrease in volatility in the first few weeks. While we enjoy price moving in our desired direction and creating profit through delta, we have no problem profiting from a stock moving sideways
      - Closing our contract once we have 21 days remaining in our contracts to potentially open a new position.
      - Managing trades at 21 days to expiration greatly reduces gamma exposure and delta expansion - price action going against our trade and reducing our potential for profitability
      - see Tastyworks example

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