Negative Theta Options over Weekend

Discussion in 'Options' started by TraderGreg, Jul 24, 2008.

  1. I am a stock trader who is relatively new to trading options. What do options traders thing about holding negative theta options over the weekend?

    It seems to me that theta decay is quite high for two full days of no trading if you are negative theta, and closing and re-opening positions is actually cheaper (with trading commissions, and as long as bid-ask spread is manageable)

    I posted this question on another site, and received a reply saying that commissions were high and that weekend news risk is a part of and can often help with trading. But, isn't the goal of trading to eliminate unpredictable external risk and take executable, higher probability trading?

    What do you do here? Thanks for your help.

  2. Maverick74


    There is no such thing as weekend theta.
  3. Hi Greg, are you holding the options or are you writing them? Personally I find most theta decay happens during market hours. It's not linear with time.
    If you are holding options there is possibility of event risk which can work in your favour, and conversely if you are short options the event risk can occasionally work against you. Randy
  4. Maverick74


    You do know that it's illegal to link your hedge fund website right? I would go back to your post and delete that part of it ASAP.
  5. This is blatant ad. Remove quick sir.
  6. Snowpro


    I don't own front month options over the weekend personally. It just feels like I am loosing ground, and indeed they are. I will hold put and calls they are more than 45 days out through the weekend. And as Beating the SP500 said, you may get a surprise over the weekend.

    However, I do like having on Calendar spreads, and being short ICs over the weekend.

    That said, I tend to see extrinsic getting sucked out on friday (or even thursday if monday's closed).

    I love Time decay.

  7. I'm pretty sure the MMs start adjusting for the weekend at the end of the day on Friday (or Thursday if the market is closed Friday). I think this was mentioned by the speaker at a TOS seminar.
  8. bh_prop


    There sure as heck is, options will lose more theta from a Thur close to a Mon open than a Mon close to a Wed open for example.

  9. Maverick74


    Friday is a weekend? Hmm....maybe in France.
  10. bh_prop


    Using my post as your logic generator so is Tuesday.

    Re-read what I wrote. I was stating the fact that all other things being equal an option will lose more value from a Thursday close until a Monday open than from a Monday close to a Wednesday open. In both cases ONE full trading day passes. I.e. there is some theta decay over weekends even though no trading takes place.

    #10     Jul 24, 2008