How i can calculate a tetha of option

jenek-cowboy

jenek-cowboy

Does anybody know a formula for this parameter?
I know a formula for delta and theorical price...But i don't see anywere how i can determine a tetha
 
Quote from jenek-cowboy:

Does anybody know a formula for this parameter?
I know a formula for delta and theorical price...But i don't see anywere how i can determine a tetha
More...

Hi jenek-cowboy,

For a black-scholes theta, if interest rates and volatility are constant you will have:

Time decay=interest received on cash equivalent of portfolio value - (0,5*variance*square asset value*gamma)

cash equivalent portfolio is: Call value-(delta*asset value)

hence,

Theta=R*(Call value-(delta*asset value)) - (0,5*variance*square asset value*gamma)

It's very therorical (rates and volty keep constant).

The best way to compute a theta is to price your portfolio value tomorrow (d+1) less the price of the option today.
It'll provide you a way to modify the volatility for tomorrow price.
 
Quote from jenek-cowboy:

Does anybody know a formula for this parameter?
I know a formula for delta and theorical price...But i don't see anywere how i can determine a tetha
More...

like delta but take the derivative with respect to time instead of underlying
 
Simplest is:
Theta = Options's Today Value - Tomorrow's value.

Today's value <- You get it from the Market.

Tomorrow's value:
From that, compute the IV. Reduce the Days to Expire by 1. Using the other 3 required parameters (Underlying price, Strike Price, Call or Put), you can determine the tomorrow's value.
 
Quote from Kash:

Simplest is:
Theta = Options's Today Value - Tomorrow's value.

Today's value <- You get it from the Market.

Tomorrow's value:
From that, compute the IV. Reduce the Days to Expire by 1. Using the other 3 required parameters (Underlying price, Strike Price, Call or Put), you can determine the tomorrow's value.
More...

6 required parameters .

Price of underlying
Strike Price
Call/Put
Days till exp ( subtract one for tomorrow )
Implied volatility
Risk Free Rate


That will still only give you an estimate of one days theta since those variables for the most part are constantly in flux
 
Quote from rosy2:

like delta but take the derivative with respect to time instead of underlying
More...

Hi Rosy,

I'm sorry but it's wrong :D

Theta is "minus" the first derivative of an option with respect of time.

Because the direction of time scale. It's not an increase in time as usual for a derivative calculus, it's a time decrease. Maturity tends to be zero.

Regards
 
Quote from Kash:

Simplest is:
Theta = Options's Today Value - Tomorrow's value.

Today's value <- You get it from the Market.

Tomorrow's value:
From that, compute the IV. Reduce the Days to Expire by 1. Using the other 3 required parameters (Underlying price, Strike Price, Call or Put), you can determine the tomorrow's value.
More...
Yes...It is true..But i want see a formula getting from a B-SH..
 
Quote from optioncoach:

Any good option broker will show the greeks of options including theta.
More...
I am from Russia :) ...And in our contry broker does't show any more information except that they get from exchange :)..
From Russia with love :)
 
Quote from MasterAtWork:

Hi jenek-cowboy,

For a black-scholes theta, if interest rates and volatility are constant you will have:

Time decay=interest received on cash equivalent of portfolio value - (0,5*variance*square asset value*gamma)

cash equivalent portfolio is: Call value-(delta*asset value)

hence,

Theta=R*(Call value-(delta*asset value)) - (0,5*variance*square asset value*gamma)

It's very therorical (rates and volty keep constant).

The best way to compute a theta is to price your portfolio value tomorrow (d+1) less the price of the option today.
It'll provide you a way to modify the volatility for tomorrow price.
More...

Good post M.

The man still needs a formula for Gamma, which sould depend on how far one is on the density function.
 
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