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To: Glenn D. Rudolph who wrote (39142)3/14/1998 11:30:00 AM
From: rag2rag  Read Replies (2) | Respond to of 61433
 
regards,

It is a proven fact that the time premium decreases significantly between the Friday of expiration and the following Monday. The near month time premium drops an average of 20% over that weekend.

I agree that this is happening. What I cannot figure out is why it should be this way. Is the game rigged ?



To: Glenn D. Rudolph who wrote (39142)3/14/1998 3:04:00 PM
From: OMM  Read Replies (2) | Respond to of 61433
 
Glenn

>>The near month time premium drops an average of 20% over that weekend<<

That comment is a little rigid, but might be a useful rule of thumb. The amount of decay is really not tied to the specific weekend. ANY weekend produces three days of decay. Also, the at the money options have much great theta (amount of decay), than the deeply in-the-money or far out-of-the-money options. Also decay grows larger as you approach expiration.

OMM


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