Anyone who’s traded options for more than a week knows the silent tax called time decay. Every day you hold a long call or put, the clock eats away at your premium. You can be “right” about direction and still end up losing money simply because you didn’t move fast enough.
So if buying options is like renting a house that gets smaller every day — why do people still do it? And more importantly, when is it actually smart to go long instead of just selling premium?
Let’s break it down without the jargon and fairy tales.
The Ugly Truth: Time Decay Is Always Against You
Options are wasting assets. A long position bleeds theta every night you hold it. That means if the stock sits flat, you’re guaranteed to lose. It’s like paying rent even if you don’t live in the apartment.
So if you’re buying, you’re making a bet that price movement + volatility expansion will outweigh that guaranteed decay. The math is ruthless — unless the underlying makes a meaningful move, you’re toast.
When Buying Options Actually Makes Sense
1. When You Expect Explosive Moves (Fast and Furious)
Earnings reports, FDA drug approvals, central bank meetings, lawsuits — anything with binary risk.
If the market is asleep but you know the alarm clock is set, long options can pay off massively. But you need to be early enough to avoid overpriced implied volatility.
Key check: Don’t buy if IV is already through the roof — otherwise you’re paying for fireworks that might never explode.
2. When Volatility Is Cheap (and You Think It’s Wrong)
Sometimes the market underprices uncertainty.
If everyone is complacent but you see storm clouds (macro risks, geopolitical shocks, hidden catalysts), long options let you lock in cheap protection or asymmetric upside.
Think of it as buying insurance when nobody else thinks they need it.
3. When You Want Convexity (Small Loss, Big Gain)
There are times when you don’t care about theta bleed because your risk/reward is ridiculous.
Paying $200 for a contract that could turn into $5,000 isn’t about winning often — it’s about winning big enough when you’re right.
This is why hedge funds use long OTM options as “tail hedges.” Most expire worthless, but the few that pay can save the portfolio.
4. When You Use Them as a Hedge, Not a Lottery Ticket
If you’re long a portfolio of stocks and worried about a crash, buying puts makes sense. You’re not trying to “beat time decay,” you’re buying peace of mind. It’s like car insurance — you don’t complain about the premium if you don’t crash.
5. When You’re Trading Momentum, Not Prediction
Most retail traders buy because they predict. Professionals buy because they see movement. If something is already breaking out with volume, long calls (or puts) let you ride momentum with limited downside.
The difference? You’re not marrying the position — you’re speed dating it.
The Real Question: Can You Respect the Clock?
Buying options isn’t dumb — it’s just unforgiving. You’re renting time, and the landlord doesn’t care about your dreams. If you expect the move to happen soon, if volatility is mispriced, or if you need insurance — go long.
Otherwise, the market will happily collect rent until you’re broke.
Final Takeaway
Most people lose money buying options because they treat them like lottery tickets. The pros who make money buying? They treat them like weapons of timing — only unsheathing them when the odds are skewed.
If you’re buying options, ask yourself:
- Am I expecting a fast move?
- Is volatility cheap?
- Am I using this for hedge, not hope?
If the answer is no, maybe you’re better off being the landlord — selling time, not buying it.
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