Option Time Value Calculation

[Brennen81]

Hello,

In IB TWS they have a time value column which is displayed as an annualized percentage. This calculation uses all days, not just trading days. I confirmed with them a moment ago. So doing it this way, two different expiry's in the same week appear to have less or more value when they really don't.

For example. Today is Friday, Monday is a holiday. There are 2 expiry's next week for the SPY, Wednesday and Friday. Besides today, Wednesday has 2 trading days, and Friday has 4 trading days. The program is showing the following time values.


SPY Wed Bid - 0.06 - TV = 1.87%
SPY Friday Bid - 0.10 - TV = 2.23%

Wednesday - 2 trading days = 0.03 loss per trading day
Friday - 4 trading days = 0.025 loss per trading day.

If I added today as a day it would still be 0.02 for both and not more for Friday

Is this not what we all should be looking at? am I missing something?

Thanks!!!!

 

[Windlesham1]

I found IB's calcs to be weird -I only use iVolatility.com -go to basic calculator and enter your stuff. Theta like all the Greeks is not linear,and is in fact illusory-it's a market,and options volatility is key
see our site:http://optionsinvesting.co.uk/category/weekly-trade-idea/

 

[Brennen81]

In regards to Theta. IB's number really does confuse me. For example. On Thursday, an out of the money option expiring the next day with a 0.09 bid had a Theta of 0.01.