Good morning, traders…

When I first started trading options, I was so focused on spotting technical setups that I completely ignored the #1 reason good trades go bad — time decay. 

I’d find a great pattern, load up on calls or puts, and then … crickets. 

The price didn’t move fast enough, and my contracts bled value. It felt like watching a delicious ice cream cone melt on a hot summer day. 

Maybe you’ve been there too. Which is exactly why I want to unpack the “market math” behind options…

The nitty-gritty options details that separate a perfectly-timed trade from one that just slowly drains your account. 

We’re talking about delta, theta, and how to use those “Greeks” to figure out whether the trade “adds up,” if you will. 

If you’ve ever wondered why some breakout trades take off while others sputter, or why holding a short-dated option overnight can wreck your gains, it’s time to pay attention…

After this, you’ll know how to match the right contracts to your trade setups (and avoid the common “market math” traps that even experienced traders fall into)…

Why Market Math Matters

Let’s break this “market math” stuff in plain English…

First, you’ve got delta, which tells you how much the option price moves when the stock moves $1. 

Example: A delta of 0.40 means that if the stock goes up $1, your option gains $0.40. Simple, right?

Then you’ve got theta, this one’s sneakier. Theta tells you how much value your option loses each day, just from the clock ticking. 

Example: A theta of -$0.06 means you’re losing six cents a day, even if the stock doesn’t budge.

Many beginner traders load up on short-dated contracts, but they forget to check if the delta can actually cover the theta cost. 

If the move takes too long, theta eats your trade alive. That’s why understanding the delta/theta ratio is so critical.

Let me give you an example from a recent trade..

The great Mr. Anderson, one of our lead trainers at Earnings Edge, was watching Las Vegas Sands Corporation (NYSE: LVS) calls. 

He chose the May 16 $39 calls with a delta of 0.42 and a theta of -$0.06. That meant he had about six and a half days before time decay would wipe out his risk tolerance. 

He paired this with a mart breakout setup, knowing the stock’s average daily range could easily hit his targets within that window. 

That’s called having an edge. 

Compare that to someone chasing short-dated Qualcomm Incorporated (NASDAQ: QCOM) 1-week calls with a theta of -$0.42 and a delta of 0.33. 

Unless Qualcomm blasts off immediately, you’re dead in the water. The clock just burns through the contract, and by the time the stock moves, it’s too late. 

That’s why those short-dated breakouts need real momentum, quickly. 

How to Apply Market Math to Your Trading

• Breakouts → Use shorter-dated contracts only if you see momentum + volume + confirmation. No dragging your feet.
• Pullbacks → Give yourself more time. Longer-dated options help absorb those choppy consolidations before the next leg up.
• Calculate your window → Divide your risk tolerance by theta. That tells you roughly how many days you have before time decay eats your stop.
• Match delta to your price target → If your stock’s ATR (average true range) won’t realistically hit your target, don’t force it.

We also saw this play out in Southwest Airlines Co. (NYSE: LUV) this week. 

I took the May $32 calls expecting a bounce, but when the setup faltered, I cut the position rather than watch theta chew it down overnight. 

No trying to be a hero, no holding-and-hoping. Just recognizing what was happening and moving on.

One last point before I wrap up: market internals matter. If the broad market is choppy, volatility is spiking, or internals are messy, I’m extra cautious. You don’t want to fight the tide.

Your homework for the week: practice running these calculations. 

Don’t just look at the chart…

• Check the delta
• Check the theta
• Check the sector
• Check the market mood

Do it enough, and it’ll become second nature.

Happy trading,

Ben Sturgill

P.S. If you want access to the system that achieved an 89% win-rate with a 72% average gain…*

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*Past performance does not indicate future results