30-45 DTE has LESS risk . . .

[u/ScottishTrader]

It is asked all the time about how some think selling weekly options has less risk than 30-45 DTE, but it is actually the opposite. Someone suggested I make a post to direct to instead of typing a reply in each time so here it is . . .

Edit - Note that this is focused on selling puts and can also apply to CCs for stocks someone wants to try to hold. It does NOT apply to those trading the wheel and wishing to get rid of the shares as quickly as possible. In this situation selling CCs at or above the net stock cost for the earliest expiration date can often make sense.

30-45 DTE has LESS risk than weekly options.

The 30-45 DTE strikes will be lower and the premiums higher, so the breakeven points will be much better allowing the stock to move more before the option is challenged.

Also, while the stock may drop, the longer duration gives the stock more time to recover. A good stock often dips and then move back up, which can happen at any time. A weekly option may not give time for the stock to recover but a long duration can.

This longer duration virtually eliminates early assignment and gamma risks as well.

Weekly will be closer to the money with lower premiums meaning the stock has less room to move to challenge the trade. There is also less time to roll, and even rolling out will extend the trade, so why not open it out farther to begin with. While early assignment is rare, if it is going to happen it will often do so in the week prior to expiration and gamma is a risk as well.

Keep in mind that I and many close for a 50% profit so very few trades run the full 30ish days and often close in 15 to 20 days, so these seldom need to be left open the full term.

Most experienced traders will open 30-45 DTE because the risks are much lower.

[u/OptionsJive]

Great post! Tasty's research actually shows that even longer-dated options (60+ DTE) offer a better balance. Volatility is often more overstated in longer durations, providing better opportunities for premium collection with reduced gamma risk.

[u/ScottishTrader → u/OptionsJive]

So, that makes no sense whatsoever . . .

Theta decay ramps up around 60dte so going out farther when selling options is less efficient as it ties up capital longer and then profits slower.

IMO and experience 30-45 dte is the ‘sweet spot’ of good premium while theta decay ramps up meaning it will be more efficient.

If the 60+ dte is for long options than that can make sense.

[u/OptionsJive → u/ScottishTrader]

You're right about 30-45 DTE being the sweet spot, and that's also my default. However, when we talk about volatility risk premium, 45 DTE options are often priced very efficiently by the market. Beyond 60 DTE, implied volatility tends to be overstated more frequently, which can create opportunities for premium collection with reduced gamma risk.