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Why a LEAP Straddle Works: Harnessing Theta Decay for Steady Profits

In the world of options trading, most retail investors focus on short-term speculation, often chasing rapid movements in stock prices. However, a more sophisticated approach is to build a position that takes advantage of time, volatility, and premium decay. One such strategy is the LEAP straddle, which involves simultaneously selling a call option and a put option with the same strike price and expiration date—typically far out in time.

Currently, I have executed this strategy on Palantir Technologies (PLTR) with a strike price of $280 and a long-dated expiration of December 17, 2027. While at first glance such positions may look complex, the reality is that they provide a structured way to profit from the natural decay of option premiums, as long as the underlying stock price stabilizes near a chosen level. With PLTR now priced around $180, this straddle is in a profitable position, and if prices hold steady, I stand to benefit daily from theta decay on both sides of the trade.

As an investor, I position myself as a disciplined learner in the markets, focusing on covered calls and cash-secured puts under the framework of my “Options Puppy” journey. With a background in accounting studies, I have developed a strong foundation in financial analysis, capital allocation, and risk management.

My core strategy is built on financial freedom through stable income streams, beginning with the reliability of Singapore government bonds, while enhancing returns through options premium generation and Tiger Vault strategies. This dual approach balances long-term security with short-term cash flow, enabling me to service housing loans and meet daily living expenses without financial strain.

Ultimately, I believe in applying freedom rules: disciplined capital management, prudent expenditure control, and a clear distinction between needs and wants. This mindset allows me to grow sustainably, stay resilient in volatile markets, and work towards lasting independence

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$PLTR 20271217 280.0 PUT$ 

The Logic Behind a LEAP Straddle

A straddle is the simultaneous sale of a call and put at the same strike. In this case, I sold both the PLTR 280 call and the PLTR 280 put, each expiring in late 2027. This is not a short-term gamble; rather, it is a calculated strategy designed to extract premium value from the option chain.

When traders buy options, they are often paying for time value and implied volatility. As the seller, I position myself on the other side of that equation: I collect premium upfront and let time work in my favor. The longer the options sit without dramatic moves in the underlying stock, the more premium decays, and the more I can realize as profit.

At the current moment, the PLTR call side is showing a paper loss of about $1,118.25, while the put side is showing a gain of $1,366.25. The net effect is positive overall. This balance is typical in straddles—the losses on one side are offset by gains on the other, leaving the trader in a favorable position so long as the stock does not drastically break out of the expected range.

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Why $180 Is the Sweet Spot

With PLTR priced near $180, the straddle benefits because it sits closer to equilibrium. The call side is under some pressure due to the possibility of upward movement, but the put side has already accrued substantial value. The combined position creates a zone of profitability around this price level.

The key here is not to predict whether PLTR will skyrocket or crash. Instead, the strategy relies on stability. If the stock continues to hover near $180, both sides of the straddle gradually lose extrinsic value, and I capture that decay as steady profit. Unlike directional bets that require sharp moves, a straddle thrives on time passing with the stock relatively range-bound.

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Theta: The Silent Profit Engine

Perhaps the most underappreciated concept in options trading is theta, or time decay. Every day that passes, options lose a fraction of their value simply because there is less time left before expiration. For long-term options like LEAPs, this effect is slower than with weekly contracts, but it still works relentlessly in favor of the seller.

In my PLTR straddle, the call side has a daily theta of 0.02, while the put side has a theta of 0.04. This means that, all else being equal, I gain approximately 0.06 in premium per day simply by holding the position. Over weeks and months, this accrues into significant income. Importantly, this theta decay is not dependent on price action—it happens automatically with the passage of time.

This is what makes the strategy so compelling: I do not need PLTR to explode upwards or collapse downwards. As long as it trades in a manageable range, time itself becomes my profit driver.

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Managing Risk in a Long-Dated Straddle

Of course, no strategy is without risk. With a strike at $280, if PLTR were to suddenly surge toward that level, the call side could balloon in losses. Conversely, if the stock were to collapse, the put side could become more expensive. This is why careful monitoring and adjustment are crucial.

One way to mitigate such risks is through rolling—closing out one side of the trade when it becomes unfavorable and opening a new position at a more appropriate strike or expiration. Another approach is to use hedges such as buying back a portion of the calls or puts to cap extreme exposure.

Still, the beauty of a long-dated straddle lies in its resilience. Because these options expire years in the future, there is time to adjust, rebalance, and ride out shorter-term volatility. Unlike short-term trades that demand immediate precision, LEAP straddles allow for a patient, measured approach.

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Why This Works for PLTR

Palantir has been a volatile stock in recent years, riding the wave of AI enthusiasm and government contracts. However, in the longer view, its price often consolidates for extended periods before making major moves. This characteristic makes it an excellent candidate for option premium selling.

At $180, the stock sits well below the strike of $280, providing room for consolidation. The premiums collected from both the call and the put reflect the market’s uncertainty about long-term outcomes. By selling into that uncertainty, I position myself to harvest consistent returns as volatility and time value erode.

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Conclusion: Profiting from Patience

The LEAP straddle on PLTR at $280 is not a speculative gamble but a systematic strategy rooted in time decay and premium collection. With the stock near $180, the position is net profitable, and theta provides a reliable daily income stream of about 0.06. Over the long haul, if PLTR remains range-bound, this strategy allows me to steadily accumulate gains without chasing unpredictable short-term moves.

In a market where many traders lose money betting on direction, I prefer to bet on time itself. With patience, discipline, and a careful eye on adjustments, the LEAP straddle transforms volatility into opportunity and waiting into profit.

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