Strategy: Will Options price surely fall when it nears expiry?

Hi,

Share your experience on this.

Imagine,

  1. We are in the last week of options contract expiry.

  2. We can see few strike price options are about to expire worthless.

  3. People who possess those options will surely try to sell and save atleast some money than 0.

  4. So prices fall.

And if we sell that option for that particular strike price and make money.

How often have you seen this strategy fail to work? What are the factors that change the course other than a very drastic market movement?

Thanks.

Markets change sudden , but it all depends upon ur strategy to earn profit

As time to expiry reduces then option premium reduces....provided all else are kept a constant. For example if you have written an OTM CE ...then due to reduced time to expiry, the premium comes down...however if the spot also starts to move (delta) the the premium gains value. So in a sense the premium of an option is an outcomes of the effect of greeks.

Do read through this to know all about options trading - http://zerodha.com/varsity/module/option-theory/​