Does negative theta in a BWB position mean time decay isn't working in your favor?

[Tri]

in the position in the image below in which i buy a call along w/ the BWB...the greeks show Theta = -59.16 (circled red). Does negative theta mean time decay is against me, ie i'm losing money each day if price stays where it is for like 4 days even if it's under the fly's tent? thanks guys

 

[status1]

Yes you will loose money on paper but it will change with time provided it stays in place which it doesn't look like it will after the fed meeting it's starting to go up and you may end up in the valley of death but if it keeps going you may be ok but it has to move up fast otherwise if it stops around 4460 you will have real losses at expiration

The theta on the butterfly does not come in much until very close to expiration
As you start with the yellow line it will go down slightly to the green line than start to shift to the red line but that is assuming it will stay in place
I would not keep this trade on for too long unless you get a big move up the next day
You also have to keep in mind the volatility which will also affect the T+0 line

The call is the one giving you negative theta at the moment

 

[Marcas]

What TOS says seems to be ok. That negative theta is a result of deep you have on call side of BF (on expiration graph). As time goes by t lines morph to match expiration and 'the deep" pulls t-line down. That pull is strong enough to give you negative theta inside BF.

That said, theta is very mercurial greek. This means it changes a lot and the number itself is not very reliable. The negative 60 you see is correct only if everything else stays unchanged - which happens very rarely (read never). This is especially true for short term trades (your is, I say, medium) and in volatile markets (as we have now).

Most influence on theta value comes from edge strikes and those are heavily influenced by IV levels and skew. Did you noticed huge drop in IV on Fri? This did have impact your theta a lot in comparison to days before. Because trend can continue on Mon then you theta will be higher (more negative, you loose more than $60) or can reverse then then your position can actually increase in value (contrary to what theta says on your pic).

The other thing is that prices of those edge strikes do fluctuate a lot and platform takes MID price calculation, which can be far from real price. I noticed that those price fluctuations did increase significantly lately. I had some trades set way below the MIDs and wasnt filled even when I tried tricks I know that worked in the past. I suspect MMs (market makers) had hard time to figure out real value of options in this environment and widened the spreads.

Summa summarum - don't pay too much attention to theta. Don't ignore it but don't stress out if you see smth you don't like/don't expect. Again, your graph seems to be ok. IF the SPX price stay unchanged to expiration your trade will be a winner. You will go through negative theta period (loosing money) but later theta will reverse and it will go up to meet expiration graph. Then theta will be higher in positive territory to make up for this dipping. The lower it goes now the higher it will be later. (Just remember about "IF" )