I am backtesting an algorithm with a 60-day warmup that is seeing bizarre theta values.

For example with SQQQ, on 2023-02-01 at 15:15, the algorithm sorted for lowest theta (highest magnitude of theta) of put options and found SQQQ 220204P00064000 while the underlying was trading at $37.11. Greeks.Theta was listed at -691.83, an absurdly high decay rate. If my math is right, the intrinsic value was $26.89 but it filled for even less at $26.80.

Clearly that -691.83 value is not the average daily decay rate of the extrinsic value. What is that number? Is the actual theta recorded in the option chain?

Many thanks, Marty

Author

Marty Scholes

August 2023