Hello all,
I am attempting to perform a quant analysis on (weekly) stock options premiums around their earnings.
My question is in regards to how anyone here would go about adjusting the premium for options with more or less time to expire. Essentially, remove the time from the equation.
For example. Say it's Monday, the company earnings were out after close, and I was looking at the stocks option expiring Friday. The options would have a certain premium already for the time, plus the earning premium. Now if that stock was posting earnings on Thursday after the close (assuming underlying price and implied vol is exactly the same, etc) the option should have a slightly lower premium due to time.
So in the end. If I am analyzing multiple company earnings dates through out the week, how would any of you go about (mathematically) adjusting for the extra premium earlier in the week? I want to somehow give them all an equal playing field. I know we may not be able to get an exact formula. But I am hoping there may be a general rule of time premium decay from Friday close to Thursday close (day before expiry).
Hope I made sense.
I am attempting to perform a quant analysis on (weekly) stock options premiums around their earnings.
My question is in regards to how anyone here would go about adjusting the premium for options with more or less time to expire. Essentially, remove the time from the equation.
For example. Say it's Monday, the company earnings were out after close, and I was looking at the stocks option expiring Friday. The options would have a certain premium already for the time, plus the earning premium. Now if that stock was posting earnings on Thursday after the close (assuming underlying price and implied vol is exactly the same, etc) the option should have a slightly lower premium due to time.
So in the end. If I am analyzing multiple company earnings dates through out the week, how would any of you go about (mathematically) adjusting for the extra premium earlier in the week? I want to somehow give them all an equal playing field. I know we may not be able to get an exact formula. But I am hoping there may be a general rule of time premium decay from Friday close to Thursday close (day before expiry).
Hope I made sense.
Weekly Option Premium and Earnings
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