Option Gurus- Is theta applicable over weekend as well? If I buy calls on Friday, would they loose some value because of theta on Monday assuming all other factors remain same?

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Nope - it doesn’t count non market days

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Theta is based on real time to expiry, not trading days. So theoretically an option should lose ~2.5 units of theta between market close on Friday and open on Monday. Of course the change in the underlying will probably be larger than theta decay in most instances.

In reality the options dealers try to capture that theta for themselves so they’re selling options based on actual time Friday and buying options based on a notional time that’s closer to Monday. Time can be fluid in options world…

So the implications for a retail trader is to understand how the bid/ask could change based on a moving time to expiry. Personally, I try to sell options on Thursday, but I don’t do a lot of that these days.

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If only it was that simple

Yes - weekends have the opportunity for market moving events to occur that would be reflected on Monday.

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Are you guys sure about that? I sell options and I’ve always seen bigger theta drops on Mondays relative to the any other day in the week. Even greater after a long weekend.

TOS also shows total days until expiry not trading days as well.

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