The Myth of Option Weekend Decay


Staff member
During recent conversion with one of my friend motivates me to write down this thread.He has mentioned weekend decay and put more weighted on that.

He was excited on explaining theta decay and impact on option value and specifically weekend decay.

Almost all options geeks workshop and seminar explains you that theta is your friend, theta is friend of option sellers etc.Statements are perfectly right there is no doubt on that but actual behavior is different.In theory weekend holding sounds good but in practical it is not.

Markets knows that the weekend is coming and market makers don't like giving away free money.If weekend decay is true than all option sellers make good money.Just sell before Friday closing and squareoff position on Monday morning will give you profit.

Market makers will start extract premiums from late Wednesday through to the end of Friday.The real weekend premium is 25% as per option analysis software.

The conclusion is that there is no point of selling option premium becuase the entire weekend is priced out of option ahead of the weekend.There are times when weekend decay is not priced in the option premium completely.This typically happens when there is a risky event during weekend.