What Is the Optimal Time to Cut Losses on a Deep Out-of-the-Money Option?
The optimal time is when the option's time value (extrinsic value) is still significant enough to recover a portion of the premium, but before Theta decay accelerates dramatically near expiration. Holding a deep Out-Of-The-Money (OTM) option with little time remaining is almost always a loss due to the high probability of it expiring worthless.
