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training_data/curated/text/58bd492102530ce89808e57cc8668637b94b754650293b33f255fb18c7220f9b.txt

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+established, the theta is 0.009, just under a penny. If Disney share price is
+unchanged when three weeks pass, his theta will be higher. Exhibit 4.16
+shows how thetas and theoretical values change over time if DIS stock
+remains at $35.10.
+EXHIBIT 4.16 Disney 35 put—thetas and theoretical values.
+Mick needs to be concerned not only about what the theta is now but what
+it will be when he plans on exiting the position. His plan is to exit the trade
+in about three weeks, at which point the put theta will be −0.013. If he
+amortizes his theta over this three-week period, he theoretically loses an
+average of about 0.01 a day during this time if nothing else changes. The
+average daily theta is calculated here by subtracting the value of the put at
+23 days to expiration from its value when the trade was established to find
+the loss of premium attributed to time decay, then dividing by the number
+of days until expiration.
+Since the theta doesn’t change much over the first three weeks, Mick can
+eyeball the theta rather easily. As expiration approaches and theta begins to
+grow more quickly, he’ll need to do the math.
+At nine days to expiration, the theoretical value of Mick’s put is about
+0.35, assuming all other variables are held constant. By that time, he will
+have lost 0.45 (0.80 − 0.35) due to erosion over the 35-day period he held
+the position if the stock hasn’t moved. Mick’s average daily theta during
+that period is about 0.0129 (0.45 ÷ 35). The more time he holds the trade,
+the greater a concern is theta. Mick must weigh his assessment of the
+likelihood of the option’s gaining value from delta against the risk of
+erosion. If he holds the trade for 35 days, he must make 0.0129 on average
+per day from delta to offset theta losses. If the forecast is not realized within
+the expected time frame or if the forecast changes, Mick needs to act fast to
+curtail average daily theta losses.