How Does the Rate of Time Decay Affect the Risk Profile of a Covered Call Strategy? ▴ Learn

How Does the Rate of Time Decay Affect the Risk Profile of a Covered Call Strategy?

A covered call involves owning the underlying asset and selling a Call option against it. The seller profits from the time decay (Theta) of the sold option.

A faster rate of decay (selling a short-term, near-the-money option) means the seller collects the premium income more quickly, reducing the time the option has to move ITM. This enhances the income and reduces the duration of the risk.

How Does an In-the-Money Covered Call Differ from an Out-of-the-Money Covered Call?

How Does the Concept of “Time Decay” (Theta) in Options Relate to the Duration of a Rally?

How Does Theta Affect the Profitability of a Covered Call Strategy?

How Do Covered Call Strategies Utilize the Concept of Time Decay?