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In theory, the value decay of the option with time is a function of the actual number of days to expiry. The mark to market system I use certainly penalises me for theta over weekends (this is because of the continuous nature of the option pricing model) Whether this is correct or not is academic, the time decay over a week is quantifiable, whether you lose it over 5 or 7 days is a function of the system you use, and it may be possible to abuse the system in some instances.
Sorry don't have time to comment more, preparing for option close out later.
Cheers
Zaheer
-----Original Message-----
From: Michael Clark [SMTP:clarkmj@xxxxxxxxxxxxxxxx]
Sent: Wednesday, 06 August, 1997 1:21 AM
To: RealTraders Discussion Group
Subject: Option Theta and the weekend.
Theoretically, theta should be captured over the weekend. Does this hold
true in either futures or equities?
Any experiences with the S&P on this matter? A sell straddle shows a
theoretical delta of around .67 a leg or 2.5 big points for the weekend.
Seems like this would be easy money?
Thanks for the input.
Mike Clark
clarkmj@xxxxxxxxxxxxxxxx
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