quick question that I should by now have the answer but I don't usually hold options over weekend, let alone long-weekends. Does theta take effect on weekends? Do it take effect on holidays, such as this coming Monday? So, typically you loose theta going from say Wed -> Thurs. But going from Fri->Mon, is that 3*theta, or still just theta because it only applies to business days? Thanks!!
Theta effect continues on weekends and holidays. The option has a time value that erodes regardless of whether the day is a trading day or a holiday or weekend.
You may have noticed that this time value erodes during the night and even during the trading day. If a stock closes at, say, 100 on day 1 and opens at 100 on day 2, the option premium will have decreased over night. During the trading day, you will see options prices decrease even as the underlying stock hits the same price point during the trading day.
dont forget this is a risky time to have much money in options that you cant sell for 90hrs. if youre worried about 3 days of theta, you may not have enough time to recover if there is any negative news.
lots of traders on vaca today, how will they react to employmt on tues?
forgotten or dump?
I think on holiday weekends it is gratis and theta gets put on hold. on business days it is only the last 2 hours it applies to. mondays are gratis too. so basically it is only 8 hours a week. the last 2 hours Tuesday thru Friday.
Good luck, make a killing.
ya, I remember reading something like that: they devalue the options in the last couple hours of the trading day, NOT overnight/over weekend. I think I will experiment with a couple puts on AMZN this weekend, learn first-hand. Thanks for all the input guys!
I'm not exactly sure, but to hopefully make money off of options theta losing value over the long weekend I've implemented a Bear Call Spread yesterday at $385-$395 but I honestly don't have a clue. Most things in this game are priced in so I would think it would be, BUT I had a broker tell me once to beware of weekends and things because time decay will eat you up. Best of luck man!