What is Decay Curve? | Telugu Options Time Decay Guide

Introduction

Decay Curve అంటే options trading లో time value ఎలా decrease అవుతుందో చూపించే graph. Expiry దగ్గరికి వచ్చే కొద్దీ value fast ga reduce అవుతుంది. FinViraj.com లో ఇలాంటి concepts తెలుసుకోవచ్చు! ⏰📉

What is Decay Curve?

Decay Curve అంటే ఏమిటి? 📊

Options time value expiry approach అయే కొద్దీ ఎలా decrease అవుతుందో చూపించే exponential curve. దీనిని theta decay curve అంటారు.

Key Concept: Time = Money in options

Pattern: Slow initially → Fast near expiry

Example: Nifty call 30 days ₹150 → 15 days ₹80 → 1 day ₹20!

How Time Decay Works

Value Components ⏰

Option Price = Intrinsic Value + Time Value

Intrinsic: In-the-money amount (doesn’t decay) Time Value: Probability premium (decays to zero)

Decay Phases 📈

30+ Days: Slow decay (₹2-3 daily) 15-30 Days: Moderate decay (₹5-7 daily)
0-15 Days: Rapid decay (₹10+ daily) Last Week: Extreme acceleration

Theta – Time Decay Measure

Understanding Theta 🔢

Definition: Daily time value loss amount Always Negative: For option buyers Accelerating: Increases near expiry

Example: Theta -8 = loses ₹8 daily

Theta by Strike 📊

ATM Options: Highest theta decay ITM Options: Lower theta (intrinsic buffer) OTM Options: Moderate theta

Weekend Effect: Friday gets 3 days theta!

Impact on Trading Strategies

Option Buyers 📉

Challenge: Time working against Need: Quick directional moves Risk: Complete premium loss

Protection:

• Buy longer expiry
• Avoid last week
• Quick profit booking

Option Sellers 📈

Advantage: Time generates income Strategy: Collect theta daily Risk: Directional moves against

Real Example

ATM Call Decay 📊

Scenario: Nifty 18000 call, spot at 18000

30 Days: ₹200 premium 20 Days: ₹140 (-₹3 avg daily) 10 Days: ₹70 (-₹7 avg daily) 5 Days: ₹25 (-₹9 avg daily) 1 Day: ₹5 (-₹5 daily)

Observation: Exponential acceleration!

Factors Affecting Decay

Key Variables 📊

Volatility: High IV slows initial decay Interest Rates: Minor impact on decay rate Dividends: Affect calls before ex-date

Market Conditions 🌊

Stable Markets: Predictable decay Volatile Markets: Irregular patterns Event Risk: Sudden decay changes

Common Mistakes

Buyer Errors ❌

• Last week option buying
• OTM lottery tickets
• Ignoring theta values
• No exit planning

Seller Errors 🚨

• Naked short positions
• Ignoring direction risk
• No volatility protection
• Overexposure risks

Managing Decay Risk

Smart Buying 📈

Timing: Avoid high decay periods Selection: ITM or longer expiry Exit Rules: 50% profit या 25% loss

Smart Selling 📉

Strategy: Delta neutral approaches Protection: Hedge directional risk Booking: Early profit realization

Technology Tools

Analysis Platforms 📱

Features:

• Real-time theta display
• Greeks calculations
• Decay projections

Popular: Zerodha, Upstox, TradingView

Advanced Tools 💻

• Option chains analysis
• Time decay simulators
• Greeks dashboard monitoring

Conclusion

Decay Curve అనేది options success కోసం essential knowledge! Time decay ని understand చేసుకుని proper strategies choose చేయాలి. Buyers కి enemy, sellers కి friend అయిన time ని wisely use చేయండి! ⏰

Key Takeaways:

• Exponential decay pattern
• ATM highest decay rate
• Last week extreme acceleration
• Strategy selection crucial

Smart Approach: Decay curve respect చేసి time-appropriate options strategies implement చేయండి! 📊

మరిన్ని options strategies కోసం FinViraj.com follow చేయండి! 📖✨