Negative theta?

Discussion in 'Options' started by a529612, Feb 22, 2007.

  1. Phil, didnt they teach you in high school algebra that -(-) equals +? You must've been chasing skirts. lol
     
    #11     Feb 23, 2007
  2. Right. Some cash and euro settled ops trade at a discount to intrinsic all the time. VIX ops are a good example of this. So are ops on supply side products during backwardation. In such cases the time value of an option is negative and converges to spot with the passage of time. In those cases, the effect observed is synthetically equivalent to being +gamma and +theta simultaneously.
     
    #12     Feb 23, 2007
  3. Maybe right before one time ( large) dividend on the low vols stock with few days to exp , no ?
     
    #13     Feb 23, 2007
  4. hopback

    hopback


    Deep ITM european style option will often trade below parity.

    They price time and vol out of the option to create a negative carry and it rises to parity as expiration approaches.
     
    #14     Feb 23, 2007