compare theta value in the long call option

Question

I read a lot about theta and I get confused. If I plan to buy a long call option to bet the stock price will go up. Is larger theta value better or smaller theta value better in terms of profit gain? For example, a stock is at 100 dollars right now. I decide to buy a call option with an expiration date 6 months later. The option with strike price 110 dollars has theta 0.45 and the option with strike price 120 dollars has delta 0.40. So, which option is better? Moreover, if we also consider in the money options (options with strike price lower than 100 dollars), does the answer change? Thanks

Bob Baerker · Answer

The primary requirements for success when buying options are getting the timing and direction right. Next in line is selecting the strike price that will provide the the highest percent gain given your expectation (hope?) for when and how much the underlying moves. IMO, basing your strike price selection on theta is effectively a waste of time because given that the two options in question are for the same long dated expiration, the net difference in theta decay between the two will be minimal.

Answered by Bob Baerker on December 21, 2020

compare theta value in the long call option

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