When Does Theta Not Matter? (Hint: Around Big Events]

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2 Responses

  1. Hey Dan,
    I always thought Theta made little to no difference when holding a trade for less than 24 hrs. I spent more time on my model and picking which far out my strike would be based on Vega. Sometimes there was a big difference there depending on the strike. Because as you said if you get a huge drop in IV it might not override a huge drop in Vega and you still got killed. For a long time I could not figure out why I lost money on huge drops in IV. I then started keeping track of how the Vega numbers looked, and then check how much they dropped the next day. I started looking at how big the Vega number was and if it seemed to high then the possible drops in Vega would wipe out the drop in IV. If I thought so I would model out some different trades just to see.
    Hope all is well. Russell

  2. Dr. Dan,
    I mean that with respect ..

    Right now AAPL 2/10, 152.50 Theta is -0 2604.. she is 152.77+1.08..

    Last week it was -1.20 something and DUE the public buying for Earnings..same with puts. So, as a result, we GOT a better SHORT on both…isn’t that what we are looking FOR???


    If AAPL 2/10, is 3.30 vs 2 .37 now, I am selling it and doing the time spread. .but it’s not. 10:15 time..

    Our friendly debate continues…


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