Comment on Theta

Chirag I Sharma commented on 26 Feb 2019, 12:05 AM

Please confirm if my understanding is correct-

1. At a spot of 1000 and strike price of 1100CE, an option is valued Rs. 120 with delta 0.5 and theta 25. Now if tomorrow I buy at the same price say 120, for me to be profitable on the same day- the underlying should move atleast 51 points for me to be profitable?

How I calculated this. With 25 theta decay, option will anyway go to 95 even if zero move, then it must move at least (120-95)/0.5delta= 50 points + 1 point profit.

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