Hey everyone and good evening! I put this video together to go over Theta (time decay) and how it effects an options price. The core mechanic you need to understand is as time moves closer to the expiration date the price of an option decreases until it eventually expires worthless. The longer an option is dated the less effected it is by theta decay which can be seen on option chains - short dated options tend to have premiums a fraction of the cost that longer ones do, especially on volatile stocks. That is because you are paying a higher price for more time.
The reason why the wave strategy is so powerful is because we are using theta to our advantage when selling CSPs. We wait for a large downside move to spike the price of a short dated option, sell it, and wait for price to correct - letting us net the entire premium or be assigned at a great price.
