AdvancedMAD Academy0:45Derivatives

Buying Time Instead of Renting It

A long-dated option decays slowly and costs far more upfront, which changes what can go wrong with the position.

0:45 · 6 scenes

This lesson is part of a MAD Academy plan.

What the Lesson Covers

  1. 0:00A long-dated option removes the clock as the main thing that beats you.
  2. 0:05The decay difference. A one-month option loses time value fast. A two-year one barely notices a week.
  3. 0:14The stock substitute. A deep in-the-money long call behaves much like the shares, for less capital.
  4. 0:23What you give up. Dividends, an expiry date that eventually arrives, and exposure to volatility.
  5. 0:32The leverage warning. Less capital committed makes it easy to take a much larger position than intended.
  6. 0:40Buy the time if the thesis needs it, and size on the shares controlled.
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Educational content only. MadStockAlerts provides market commentary, research, and educational content. It is not personalized investment advice, and nothing here is a recommendation to buy or sell any security. Trading and investing involve substantial risk, including loss of capital. See the Risk Disclosure and Customer Agreement.
Educational content only. MadStockAlerts provides market commentary, research, and educational content. It is not personalized investment advice, and nothing here is a recommendation to buy or sell any security. Trading and investing involve substantial risk, including loss of capital. See the Risk Disclosure and Customer Agreement.
Buying Time Instead of Renting It — MAD Academy Training Video · MadStockAlerts