Options Forum: The End of Days

This article was originally posted June 10, 2004, and is being reprinted as a special bonus for TheStreet.com readers. Steve:

I would appreciate some background on a comment in a recent Columnist Conversation post where you said:

"The main impact of the shortened week is that options premiums got noticeably squeezed yesterday and today as most traders recalculate their pricing models to reflect one less trading day."

At first glance, this makes sense. But when I think about it a little, it's confusing. It seems to me that calendar days should be more important than trading days when it comes to valuing options premiums.

I think this because events that impact value happen even when the market is closed. Takeovers can be announced over the weekend. Commodity prices can change on the world markets. Terrorists can act ... or get caught. Executives can die. On this particular holiday, courts will still be open and could issue rulings with equity impact, etc.

Thank you, ...