Introductory Context
"Options time value decays over calendar days, not trading days. Friday's closing price incorporates the weekend theta. Monday's opening reflects two weekend days already paid. Options held over weekends effectively pay three days of theta for two days of time — Friday counts three calendar days of holding cost."
How Weekend Theta Works
A Nifty ATM call priced at ₹90 on Friday at 3:30 PM with 9 calendar days to Tuesday expiry. Theta: ₹8 per calendar day. Weekend decay (Saturday + Sunday = 2 calendar days): ₹8 × 2 = ₹16. Monday opening (Nifty unchanged, VIX unchanged): approximately ₹90 − ₹16 = ₹74. The option opens ₹16 lower purely from weekend theta — no underlying move.
The Friday Afternoon Options Purchase Trap
Buying options Friday afternoon for an expected Monday gap costs three days of effective theta (Friday, Saturday, Sunday) for two days of holding. Near-expiry Friday purchases are particularly expensive — weekend theta represents a high percentage of small remaining time value.
Holiday Theta
National market holidays extend the weekend effect. A holiday Monday means the option held from Friday to Tuesday carries 4 calendar days of theta priced into Friday's close (Friday night, Saturday, Sunday, Monday). Scheduled holidays are incorporated into options pricing efficiently by market participants. The session before a holiday prices in the holiday's calendar day theta pre-emptively.
The Calendar Day Check
Before holding weekly options over any weekend or holiday: count the actual calendar days until expiry. More calendar days through weekends and holidays means more theta cost, even if the number of remaining trading sessions is the same.