I have been using Sensibull for my Option Studies till now, I have recently started using Upstock Option Greek using API. I have identified a difference in the Theta Value between Upstox and Sensibull that to on the day of the current expiry.
For example
I am tracking Nifty 22550 CE on 2 Expiries here
As in the images you can see there is only a few difference in value of theta Upstox is showing -10.9 Sensibull is showing -10
I have observed similar discrepancies across multiple strikes and instruments. However, except for Theta, all other Greek values (Gamma, Vega, etc.) match between the two platforms.
I am no expert in the calculation of greeks and am a bit confused about this
It will be great if you can share some insight regarding this
The Theta difference between Upstox and Sensibull is likely due to the assumptions in the Black-Scholes model that generates the option Greeks. This is exacerbated by it being an expiration day.
Here is the modeled theta for the Nifty assuming a strike of 22500, underlying price of 22500, IV of 12%, and with various time until expiry. As you can see, theta has exponentially larger impact near expiry.
We are using discrete, intraday time intervals to calculate our Greeks including IV. If Sensibull or anyone else is using something basic like “1” (or a larger fraction like 0.5) for one day until expiry, you will get a different theta. The orange bubbles in the chart above show intraday values of theta. You can see that small differences in time on expiry can have a substantial impact on theta.
Theta is meant to help you understand how much the option’s value will decay if you hold for one more day - and nothing else changes. If the trade didn’t go your way today, then you will have an understanding of how much more the underlying will need to move in order to break-even based on holding overnight.
So, from a practical perspective, theta is of little value during the final minutes / hours prior to expiry. The Greeks that matter are Gamma and Delta.
