With no trading on Christmas and shortened trading days on christmas eve and the day after Christmas, what will happen to the time value of an option with a theta of 0.15? Will the value of the option decrease because of the shortened and closed trading days? Or are these days already factored into the price?
Theta is the theoretical time decay. Your option will decay 15 cents per calendar day. Half-days do not matter. A calendar day is a calendar day. But theta is not constant and will change by a small amount every day. The market makers know the holiday is coming also. Thus, it's likley they have already built in a slight decrease in the price of all options to account for what everyone knows is coming. Mark http://blog.mdwoptions.com/options_for_rookies/