Theta adjustment for weekend?

a529612 · Feb 10, 2007

When do they usually adjust the price of the option to reflect theta loss over the weekend?

FullyArticulate · Feb 10, 2007

At exactly 2:17pm on Friday. Never an exception. "They" got together and decided on that time long ago. Easy money can be made--just sell an option at 2:16 and buy it back at 2:18.

Or maybe the market isn't stupid enough to do it instantly and instead depresses IVs slowly throughout Thursday and Friday.

Nah, it's free money.

a529612 · Feb 10, 2007

Quote from FullyArticulate:

Or maybe the market isn't stupid enough to do it instantly and instead depresses IVs slowly throughout Thursday and Friday.

Does the short side have an edge if you short before the close on Wed and hold it for the weekend, assuming the underlying trades flat?

FullyArticulate · Feb 10, 2007

Quote from a529612:

Does the short side have an edge if you short before the close on Wed and hold it for the weekend, assuming the underlying trades flat?

Unfortunately not. By the time Monday rolls around, the option has been discounted an appropriate amount.