I am pricing equity and equity index options, can someone please helpme with how trading days vs calendar days affect pricing. What shouldone logically and theoretically use to compute and account for optiongreeks. Any help will be much appreciated. ThanksSteve

MISTAKE

Depends I suspect on your model, but most simplistic models assume some form of continuous trading while the market is open. When it isn't, it simply doesn't exist and there is an assumption of zero change. Like many option assumptions, it is wrong, but may be taken into account by different market prices and subsequent 'implied volatilities'. Most measures of time in option models are trading time rather than calendar time. Consequently if converting an annual volatility measure into a daily volatility measure, the calculation take into account trading days rather than calendar days. This will affect daily measurements of Greeks, particularly Theta and Gamma - there is a 'weekend' effect which will not be reflected in most models - the models can't be easily adjusted and in any event it is likely to be a waste of time. The trader just has to avoid being stupid.