I was told by an ex-marketmaker that he started on Fri AM to price in the weekend decay and by late PM it was fully priced in. George
But wouldn't that endup giving you something for free. You don't pay for the decay, but still enjoy the potential of some market moving news during the weekend. Then why not buy tons of straddles at the close on Fridays and unload them on Mondays?
Discussed here amongst others: http://www.elitetrader.com/vb/showthread.php?s=&threadid=70707 Also, somewhere on this thread I posted some papers pertaining to long weekends etc. Good luck.
rdemyan I remember once you posted how to visualize SPX credit spread and SPY hedge in TOS. can you please direct me to that post or explain briefly.thanks
Not to forget... slippage and commissions. I've heard Dr.J on CBOE TV mention this on Friday episodes that market makers lower IV on Friday (starting from 11am) to synthetically move time (I think Mo quoted "IV is synthetic time"). And IV usually pops a bit on Mondays to usual levels, now that the theta has passed.
If you're comfortable with time spread (calendar) behavior, diagonals could be something to look at for diversification purposes and will leverage your knowledge of credit spreads and risk management skills.
NEW SPX CROSS MONTH FLY OK I finally started using NCompass to do some equity options and wanted to place an SPX Cross-Month Fly to test the haircut and profitability and avoid some of the premium issues I might run in to with he futures options and different underlying futures expirations. So for your education, here is my first SPX foray: STO 25 OCT SPX 1400 Calls @ $.20 BTO 50 NOV SPX 1400 Calls @ $3.70 STO 25 DEC SPX 1400 Calls @ $10.10 Net credit = $2.90 or $7,250 GOOD NEWS: Called in to determine my haricut and I was told... wait for it.... ..... No haircut popped up for the postion. In other words it was delta neutral at the opening of it so no haircut or margin. Of course that could change as the position moves but it will remain close to delta neutral for some time so the haircut should not pick up. Tomorrow I will have a detailed picture of my haircut for this position and see.
Awhile back, risk mentioned 'time flies'. Is this a time butterfly? Can you point me to some information on these? It looks like what Coach is doing qualifies, but can't really be implemented without SPAN or haircut. Thanks.