How come my short vertical put has negative theta?

Jack:
Can you explain how "Skew" shifts the minimum Theta (for PUTs) lower than ATM? The picture you posted incorrectly implies the minimum Theta is ATM, and we can observe the minimum Theta is at a lower strike than ATM (20-30 points lower on the Expiration identified). It would be educational to gain a better understanding of this, and perhaps how this relationship morphs over the years with the market conditions. This post has piqued my curiosity. {I think you are correct, it is due to Skew, but wrestling with getting my head around it}

 

It is not matter of calls or puts, it is matter of strikes. You can construct any trade with calls or puts for same P/L profile, and depending on the strikes, the trade will be theta positive or theta negative.

 

From your post it appears you fail to comprehend the specifics of the original post.

 

The original post compared call and put vertical spreads. I just pointed out that what impacts the theta is the strikes, not if you do it with puts or calls.

 

Fascinating response!
You may wish to revise. -- perhaps you intended to post in a different thread.

 

Original post: "short vertical put will always have negative theta while a short vertical call will have positive theta."

My comment: "It is not matter of calls or puts, it is matter of strikes."

Which means that short vertical put can have positive or negative theta (depending on the strikes), and short vertical call also have positive or negative theta (depending on the strikes).

 

Yes it is counterintuitive because the ATM has a higher TV.

But the greeks are a snapshot in the frozen world of theoretics.

Extrapolate time out to the last day of trading (or, perhaps sooner) in this frozen world.

The ATM will still have considerable TV, while the OTM has reached a near minimum value that day or sooner.

So the OTM reaches near zero sooner than the ATM.

Hence, given the skew and the strikes from the example, the OTM has the greater rate of decay.

 

@Kim Klaiman:
Your post "seemed" superficial and shallow. I made the assumption the OP has more than a passing knowledge of options. -- I missed that his post included the word CALL --- My bad.

 

Fact is, that the vertical call has a positive theta. I am not saying "it has to be" I am saying that thats the way I observed it. Question is, how come selling a vertical put will be theta negative?

 

That makes a lot of sense and it is something I've observed many times, still, my vertical is not ATM. For example, at time of initiating it, it was 15 points OTM.