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Tackle Today: How Time Decay works with Holidays

November 23, 2022

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«Weekends too!»


The looming Thanksgiving holiday makes now a perfect time to highlight how options pricing behaves around market closures and weekends. Recall that time is one of the inputs to the options pricing model and that time decay is one of the primary drivers of performance. Specifically, calls and puts lose value as time passes.

So how does time decay work on holidays and weekends if the market isn’t open? Do options lose two days of value over the weekend? If they did, then wouldn’t it be better to sell them on Friday to capture the “free money?” Or, positioned differently, wouldn’t it be better to buy options on Monday to avoid the two days of decay that strike over the weekend?

It would if that was how time decay worked. But the market is pretty efficient. Generally, you will see options price out the weekend decay by the time the market closes on Friday, such that you don’t see a dramatic change in option values between Friday’s close and Monday’s open.

The same goes for holidays.

Video Of The Day: Queen’s Court – Pick an Options Trade: Delta or Theta on $DFS & $DKS?

On today’s Queen’s Court, coaches Emily and Matt have a discussion on which options trade they should take on $DFS and $DKS: Delta or Theta?

Chart of the Day: U.S. Dollar ($UUP)

Chart of the Day: U.S. Dollar ($UUP)

The rollover in the dollar continues and is one of the catalysts buoying equity prices.

Today’s line up

Traders Lounge 11 AM EST

Join the coaches in this live lounge, ask questions, discuss ideas or just sit back and listen to veteran traders discuss market conditions.

The Coaches Show Replay

If you missed last night’s episode where Coach Gino Poore discussed Build Theta for the ThetaGiving Holiday or would like to watch it again, check it out here.

Halftime Report 12:30 PM EST

The Halftime Report starts at 12:30 EST and covers what news is driving the market, chart analysis from the movers and shakers of the day, and fun in a way that only Matt and Tim can deliver.

Trade Masters 7:00 PM EST

Every Wednesday at 7 PM EST join us on the Trade Masters where two Coaches go head-to-head to see who can find the best trading setup.

Trading Justice Podcast: Each week your hosts guide you on a journey of financial education.

Trading Justice 503: Theta-Giving

In this episode, Mark and Matt are joined by Gino Poore to discuss a little Theta-Giving.

Theta is an amazing core concept in trading and Gino discusses theta in general and how it applies to these long holiday stretches. There are so many ways to make money in the market and theta is certainly near the top of the list.

In this Thanksgiving week let us take a moment to thank you for being part of the podcast community. We love our community so much and wish you all a fantastic Thanksgiving!

Listen to this episode in the player below.

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