For CME's futures options, do most participants use a 365 day convention or a 252 day convention? I realize that it is our choice, but I'm interested in hearing from practitioners about what is common.

Then within each day, is it usual to only take out time during the active trading hours (say 5:00-14:30 ET for crude oil) or do you take out time according to the wall time passing?

Edit: a related question (with some informative answers) is Ways of treating time in the BS formula. But I'm still interested in answers related to CME.


1 Answer 1


As you mention, it's your own choice; I see the crux of this matter in two points: the first is how you accumulate your theta and the second is how good your volatilities on Friday look versus on Monday.

I'd personally be inclined to use calendar days for something like oil (I would expect that the chance of a geopolitical event such as a war starting over the weekend is at least 2/7th), while for something like cotton I'd be more inclined to use business days.

During the day: I have never bothered with this, but I guess if you're looking to be a market maker you should. The thing here is that not all hours are equal. If you look at intraday measures of realized volatility, you'll see that around the pit opening and around settle are typically more volatile than other hours in between. So ideally you would account for that. Additionally, on days on which numbers are published, you would also expect some potential additional volatility around them for which you could adjust. So I wouldn't use either or what you are suggesting if you want to be really precise about this.

  • $\begingroup$ Not sure how to thank people for edits by upvotes or something, but thatnks for the edit noob2 $\endgroup$
    – Bram
    Jun 27, 2017 at 14:51

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