re: rrs/rrso nice post cali but the time value rule of thumb...

re: rrs/rrso nice post cali but the time value rule of thumb only applies very close to maturity. a year or 2 out the time value barely decays at all - the curve looks very flat and decays moderately with about 9 months to go, it decays even faster with about 6 months and falls off a cliff with 3 months - NEOO is a good live example but any option text book will show a time deca chart.

In RRSO's case if the time value at the beginning of this year was about 3c it would still be about 2-2.5c now. It is always going to be impossible to quantify in the market because we don't know what volatility to put in the equation - I am guessing that with Peru and Puntland news coming over the next 6 months the volatility increase will outweigh the decay in time value - again a good example is NEOO over Sept04-Mar05 - 6 months of decay but because implied vol went up the value of the options increased relative to the spot price of the heads.