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Strategies & Market Trends : Canadian Options

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To: Jan Johnstone who wrote (496)	5/27/1997 6:41:00 PM
From: Dave.S	of 1599

Jan: The decay rate you ask about is called The Theta, or the time decay factor. It is the rate at which an option loses its value as time passes. The theta is usually given in points lost per day, so an option with a theta of -0.10 will lose 10 cents in value for each day that passes with no change in other market conditions. A long position will always have a negative theta, a short position will have a positive theta. I could type out the formula used to calculate theta by programs but its pretty long. Any good mathematically oriented options text should provide it. If you want me to fax it, e-mail me. A good option software package will calculate this for you. Dave

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