How Time Decay (Theta) Quietly Destroys Your Trades

Instagram:   / alexmonahan  
Twitter: https://x.com/AlexMonahan100

Time decay—also known as Theta—is the silent killer of most retail options trades. You can buy the perfect call or put option, get the stock direction right, and STILL lose money… all because of Theta. In this video, I break down exactly how time decay works in options trading, why it matters more than most beginners realize, and how professional traders at firms like Susquehanna manage this risk every single day.

My name is Alex Monahan. I’m a former quantitative derivatives trader at Susquehanna International Group (SIG), one of the largest options trading firms in the world. I spent years trading index options professionally, and now I teach traders and sports bettors how to think like a quant. In this video, I’m pulling back the curtain on one of the most misunderstood Greeks: Theta.

So what is Theta? In options trading, Theta measures how much value your option is expected to lose each day purely due to the passage of time. Every option has an expiration date, and as that date gets closer, the time value of the option decays. If volatility stays constant and the stock doesn’t move in your favor, the option you’re holding is slowly bleeding money every day—even if nothing else changes. That’s why Theta is often called “the options trader’s rent”: it’s the cost of staying in the position.

I’ll show you:
1) Why out-of-the-money calls and puts lose value the fastest as expiration approaches.

2) How Theta accelerates in the final weeks before expiration.

3) Why holding long options overnight can be one of the most expensive mistakes for retail traders.

4) How professional traders use Theta to their advantage, by selling premium through strategies like covered calls, iron condors, and calendar spreads.

5) Real examples of options chains, showing how time decay eats away at premiums day by day.

But Theta isn’t just a risk—it can also be an opportunity. If you understand how time decay works, you can flip the script. Instead of being the one paying Theta, you can be the one collecting it. That’s exactly what professional market makers do: they sell options, manage risk with hedges, and let time decay quietly generate profits for them. In this video, I’ll explain how traders flip Theta from an enemy into an ally.

Whether you’re brand new to options or an experienced trader looking to refine your strategy, mastering Theta is critical. Ignore it, and it will quietly destroy your account. Respect it, and you can finally understand why certain options trades consistently lose money—and how to structure trades that give you an actual edge.

I’ll also tie Theta into the bigger picture of options Greeks: Delta, Gamma, Vega, and Rho. Understanding how these interact is the foundation of professional trading. For example, a long call option has positive Delta but negative Theta. A short put has positive Theta but carries downside risk. The Greeks aren’t just abstract math—they’re the building blocks of real trading decisions.

By the end of this video, you’ll know:
1) Why long calls and puts are a race against the clock.

2) Which strategies benefit from Theta decay.

3) How time decay interacts with implied volatility (Vega).

4) What traders at firms like SIG actually do to stay profitable in a market where Theta never sleeps.

Options trading is about more than just “picking direction.” It’s about understanding how probabilities, volatility, and time work together. Theta is at the center of that puzzle. Ignore it, and the market will punish you. Learn it, and you can finally trade like the professionals.

This is the type of insight I wish I had when I started out. Most YouTube videos just brush over Theta as “time decay,” but they don’t show you what it means in practice. In this video, I’ll walk through real option examples, show you how fast decay accelerates as expiration nears, and explain how you can use this knowledge to avoid the traps that most retail traders fall into.

If you’re serious about trading options, this is a concept you cannot afford to ignore. Theta is quiet, invisible, and relentless—but once you understand it, you’ll never look at options trades the same way again.

Make sure you watch until the end, because I’ll also reveal the exact strategies professional traders use to turn Theta into consistent profits.

Subscribe to my channel for more videos on options trading, sports betting analytics, and quantitative strategies. I’m Alex Monahan—former Wall Street quant, now sharing everything I learned about how to find an edge in markets.

#trading #optionstrading #tradinghacks #tradingstrategy