Time to maturity less than a day

[Bo Zhou]

Hi guys,

I'm trying to calculate the prices/implied volatilities for options that will expire next day or on the same day.

How do I do to use fractions of a day as the parameter for time to maturity? From the examples I can only see using Date objects which only has resolution in whole days.


Thanks,

Bo

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[Luigi Ballabio]

On Mon, 2009-04-06 at 18:54 +0000, Bo Zhou wrote:
> How do I do to use fractions of a day as the parameter for time to maturity?

As of now, you don't. The Date class should be extended to include time
information.

Luigi


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easily by reducing it to the question, "How would the Lone
Ranger have handled this?"



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[Bo Zhou]

Thanks Luigi,

Is this on the todo list? Any time frame? If not how do I request this
feature?

On the other hand, is Theta usually big enough to make significant
intraday difference at all?

Cheers,

Bo

Luigi Ballabio wrote:
> On Mon, 2009-04-06 at 18:54 +0000, Bo Zhou wrote:
>
>> How do I do to use fractions of a day as the parameter for time to maturity?
>>
>
> As of now, you don't. The Date class should be extended to include time
> information.
>
> Luigi
>
>
>

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[Ferdinando Ametrano-4]

On Tue, Apr 7, 2009 at 1:19 PM, Bo Zhou <[hidden email]> wrote:
> Is this on the todo list?
No

> Any time frame?
No

> If not how do I request this feature?
You're doing it ;-)
Jokes aside you can use the "feature request" at
http://sourceforge.net/tracker/?group_id=12740&atid=362740

Anyway I might be missing something, but it doesn't make sense to me
to calculate implied volatility for an option with less than one day
to expiry; even for its price it should be fine to just use intrinsic
value.

ciao -- Nando

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[Luigi Ballabio]

On Tue, 2009-04-07 at 11:19 +0000, Bo Zhou wrote:
> Is this on the todo list? Any time frame? If not how do I request this
> feature?

Contributing a patch would be a nice way :)

> On the other hand, is Theta usually big enough to make significant
> intraday difference at all?

Sorry, I don't have enough experience in option trading to answer this.

Luigi


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remove all doubt.
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[Bo Zhou]

Thanks Nando and Luigi,

There is a workaround - assume 1 day is 1 min, then scale the interest
rate accordingly.

1 day = 24*60 mins => 24*60 days = 1440 days ~ 4 years




Luigi Ballabio wrote:
> On Tue, 2009-04-07 at 11:19 +0000, Bo Zhou wrote:
>
>> Is this on the todo list? Any time frame? If not how do I request this
>> feature?
>>
>
> Contributing a patch would be a nice way :)
>
>
>> On the other hand, is Theta usually big enough to make significant
>> intraday difference at all?
>>
>
> Sorry, I don't have enough experience in option trading to answer this.
>
> Luigi
>
>
>

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[Mike S-10]

> On the other hand, is Theta usually big enough to make significant
> intraday difference at all?

It can be, and theta decay does not occur linearly with the passage of
time. For instance, in US equity markets, you typically lose half your
theta in the first hour of trading.

Also, approaching the close on expiration Friday, I've seen traders
get frustrated having to continually increase the vol's they are
running in order to stay on their markets.

The last hour can be an issue when your system is distributed and
there is confusion about what software is running in what time zone.
Nobody wants their quoting application running negative volatilities.

-Mike

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