time erosion

Discussion in 'Options' started by tradingcards, Jul 25, 2007.

  1. if you are dealing with options that expire 1-2 months away, at what point does time erosion accelerate the fastest?

    any good links or books on this?

  2. MTE


    Options lose around a third of their time value in the last month, so the last month is critical. Time decay accelerates all the way to expiry.

    Any good book on options discussess time decay.
  3. Each day you lose 1/n of the time value, where n is the days remaining. Time value decreases the most, percentage wise, as you get closer to expiration. On the last day it loses 1/1 or 100% of time value. On the day before that, it loses 1/2 of t.v.

    If you follow an OTM option on the Thurs before expiration, you will even see it erode as the day goes by.