IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Expected Time Value Decay of Options: Implications for Put-Rolling Strategies

  • George F. Tannous
  • Clifton Lee-Sing
Registered author(s):

    Assuming the underlying asset price remains constant, previous studies show that the time value of an option decays gradually at a rate that accelerates over time and peaks at the expiration date. Thus, a significant portion of time value is lost in the four weeks leading up to expiration. This paper shows the time value of currently at- or near-the-money options should be expected to decay at a rate that decreases over time. The time values of options that are currently deep-in- or deep-out-of-the-money are expected to initially rise and then resume the normal decay pattern. Copyright (c)2008, The Eastern Finance Association.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1540-6288.2008.00191.x
    File Function: link to full text
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Article provided by Eastern Finance Association in its journal Financial Review.

    Volume (Year): 43 (2008)
    Issue (Month): 2 (05)
    Pages: 191-218

    as
    in new window

    Handle: RePEc:bla:finrev:v:43:y:2008:i:2:p:191-218
    Contact details of provider: Web page: http://www.easternfinance.org/

    More information through EDIRC

    Order Information: Web: http://www.blackwellpublishing.com/subs.asp?ref=0732-8516

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:bla:finrev:v:43:y:2008:i:2:p:191-218. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)

    or (Christopher F. Baum)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.