Part of an option's price is time value: you're paying for the chance that the stock moves before expiry. That part shrinks every day, and it shrinks faster as expiry gets closer. That shrinking is called time decay (or theta).
The small-move trap
If the stock moves your way but only a little, the gain from the move can be smaller than what you lose to time decay. You were right about the direction and still lost money on the option.
That's why the Shelf card can show a figure like "-18% even if right": the aim is so close that the option is estimated to lose value even if the stock gets there. When you see that, the setup isn't worth trading with options.
What helps
- Give the trade more time than you think it needs. NextShelf picks an expiry around three times the typical days to the shelf.
- Prefer setups with more room to the aim.
- Check the estimate at the aim before you buy, not after.
- Time value shrinks every day, faster near expiry.
- A small move can be worth less than the decay.
- 'Even if right' losses mean: skip options on that setup.
A put shows '≈ -18% even if right'. What does that mean?
Educational content only, not financial advice. See today's setups in NextShelf →