Befriend the Trend Trading Message Board

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Strategies & Market Trends : Befriend the Trend Trading

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To: Rose Rooney who wrote (27229)	10/13/2002 2:49:57 PM
From: TraderWithNoName	Read Replies (2) of 39683

A newbie? You've been a member since 9-6-97..longer than I !(G) The spreadsheet at the top is all about finding the time value of an option. Time value=premium(the close)-intrinsic value.If the option is out of the money then it has no intrinsic value and the premium is all time value. The time value found is in the colored columns labeled "time value". I found values for the nearest in and out of the money call and put for OEX options.Thats four sets of options data. The last column is the average of these four time values for each day. I only collected the last 15 days of the options life since this is when decay starts to speed up. The decay chart on the left plots all four sets of option data on one chart. Each color on the chart matches the color of the data on the spreadsheet.(I thought this was extremely clever).The data starts on the left for Jan. 28th and moves across the right to Feb. 15th. The time axis is not labeled by date,but by its row in the spreadsheet. The decay chart on the right is the data for the average of all time values .This is the last column of the spreadsheet. The last chart is the daily OEX close. Notice how the OEX rose from 548 on Feb. 7th (my birthday) to 567 on Feb.14th and the average time value went from 8.75 to 1.23. Even though the OEX went up some $19, the option premium lost some $6.5 in time value. That's why you don't want to be holding out of the money options during expiration week. If you did not understand some of the terms I used go here and do some homework(G) cboe.com

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