Time Decay & My First Options Trade of 2026
Alright, today is January 10th, 2026. Already, more than one week has passed this year. As a stock option writer, time generally tends to be on your side. Every day that passes brings time decay (theta) working in our favor. All else equal, as the time to expiration declines, options decline in value because the time value component of an option’s price decreases.
This year I have executed one stock option trade so far, which admittedly leaves me with a slight feeling of unease. While time decay is generally a friend, the opportunity cost of only having one position open while the broader markets have been off to a great start is weighing on me. Put option prices across the board have declined a lot very quickly as markets rally, making entry points less attractive currently.
I would like to stress that while today I report on this trade after the fact, the ultimate objective of this blog is to identify interesting options before I trade them, so that you also have an opportunity to evaluate them and are able perhaps even better than me. But I am still working diligently on creating a framework that does just that.
Preferred Trading Ground Rules
I generally prefer to trade either liquid US single stock options or options on ETFs that track major indices. The simple reason being that US options markets are far more liquid and efficient than most European (by that I mean the geography, not the type of options) options markets.
That being said, my very first option trade of the year does not quite fit the framework I set out for myself. This trade was on DSM-Firmenich (ticker: DSFIR), a company producing vitamins, flavors, and fragrances for the nutrition, health, and beauty industries. The company has a market cap of EUR 17bn and is listed in Amsterdam, The Netherlands.
Let’s break down the details of the trade, along with what I believe I did right and where emotions perhaps got the better of me.
The Option Characteristics
Here is a summary of the specifics for the put option I sold:
| Characteristic | Detail |
| Underlying Asset | DSM-Firmenich (Listed in Amsterdam) |
| Option Type | Put (Sold) |
| Trade Date | Thursday, January 8th, 2026 |
| Strike Price | EUR 64.00 |
| Expiration Date | January 23rd, 2026 |
| Premium Received | 0.47 per share or EUR 47 (before costs/taxes) |
| Stock Price at Trade | Approx. EUR 67.00 |
| Capital at Risk | EUR 6,400 |
| Return on Risk | 0.7% over 15 days (approx. 17% annualized) |
Note: The annualized return figure is largely irrelevant here, as the trade is a one-off and does not fully account for the specific risks taken.
What I Did Right
The fourth reason listed below was the main driver for me to go ahead with the trade, despite the framework inconsistencies.
- Liquidity Management: I used a limit order that matched the best ask price. I patiently waited for the market to move towards me. This means I provided liquidity rather than taking it aggressively, which resulted in a slightly better price than immediate execution would have provided.
- Avoiding Event Risk: DSM-Firmenich will report earnings on February 12th, 2026. The option expires ahead of that announcement, successfully avoiding the significant volatility and risk associated with the earnings report.
- Position Sizing: I only traded one option contract, leaving me flexibility to “double down” or adjust the position at a lower strike price if necessary.
- Willingness to Own: I am willing to own this stock outright at the strike price. This is the cardinal rule of cash-secured put selling. If assigned, I wouldn’t mind holding the stock long-term, unless some seriously bad news fundamentally changes the company’s outlook.
Where I Strayed From My Rules
The more I think about it, the more I realize that emotions probably got the better of me. A few elements of this trade don’t quite match up with my intended framework:
- “Moneyness” (OTM Target): The option was only 4.5% out-of-the-money (OTM) at the time of the trade. My personal rules state I should target options that are at least 10% OTM to provide a larger buffer.
- Delta Level: Following from the high moneyness, the option’s delta was approximately -0.25. This implies roughly a 1-in-4 chance that the option ends up in the money by expiration. This felt a bit too much like a “coin toss” for my typical risk profile.
- Expiration Cycle: I traded an option that does not expire on the third Friday of the month. As a general rule, we should aim to trade standard “monthly” options because they are typically the most liquid. The only next available monthly option would have expired after the earnings announcement, which I wanted to avoid.
Conclusion
Overall, I followed more than half my rules correctly on this first trade, but the high probability of assignment makes it a riskier play than I intended for my standard operations. Fortunately, I genuinely wouldn’t mind owning the underlying stock. I’ll keep working on that pre-trade framework for the next entry!
Disclaimer
The information provided in this blog post is for informational and educational purposes only and is not intended as investment advice. Options trading involves a high degree of risk and is not suitable for all investors. The hypothetical targets, strategies, and examples discussed do not guarantee future results.
Readers should be aware that past performance is not indicative of future results. It is essential to conduct your own research and due diligence, or consult with a qualified financial professional, before making any investment decisions. The author is not a registered financial advisor.