Options Trading Tutorial

Stock Options Trading Question?

I know that there is a formula to figure out how much a stock option loses everyday from time value. Can anybody tell me what that is. Thanks I am trying to figure out how much the option will go down in a weekend assuming that the v is the same

Public Comments

1. There's no set formula. Time value reflects implied volatility (iv), and iv is constantly changing. Apart from IV, I guess you could just divide the time value by the number of days, and predict that the time value would decline by that number, but as i said, that would ignore iv.
2. The previous poster is probably trying to make the point that the change in price from day to day is not due simple to the reduced time to expiration. Other factors also change and that will change the price. But you probably knew that. The direct answer to your question is that it is a factor conventionally called "theta" and the forrmula is on the page linked to below. Most option software has this calculation built in, so you don't have to worry about actually doing it yourself. The formula is about 3/4 of the way down this page in this link. http://www.optiontradingpedia.com/options_theta.htm