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Take the premium and divide it by the number of days that you intend to own it.
If you own it to expiration the task is easy and your cost per day is there.
If you have a 10 day time frame, the task is a little more difficult. There are
various formulas that will give you the time erosion characteristics of
options. Ira.
Neal Chabot wrote:
> I know what it means to amortize my home loan,
> but what does it mean to amortize an option?
>
> Ira wrote:
>
> > The best way to buy an options is to know what its theoretical value is at
> > a given price. If you are going to trade the underlying for a period of
> > time and amortize the value of the option then 1/4 or 3/8 isn't going to
> > make much difference. Ira.
> >
> > Mervin Yeung wrote:
> >
> > > Hi RTs,
> > >
> > > I am trying to use options to replace stops. I worry about the
> > > liquidity. I know the close is usually the most liquid of the day. I
> > > wonder if I use Market on Close Order to buy calls or puts right at the
> > > close, is it a good way?
> > >
> > > Thanks in advance!
> > >
> > > Mervin
> >
> >
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