Market Measures - December 16, 2020 - ATM vs OTM Decay Curves
For OTM options, we manage early because the option’s price decay tapers off around the 21 DTE mark, and we are better off deploying our capital for higher theta values. For ATM options, we manage early because excessive risk, as measured by gamma, increases more dramatically after the 21 DTE mark, and we are better off starting the trade fresh with a lower gamma value.