Theta decay

Sun, 21 Jun 2026 00:00:00 +0000

Theta is the option Greek that measures how much premium an option loses for each calendar day that passes, holding the underlying price and implied volatility constant. It is the daily cost of time. Theta is negative for an option buyer, who watches the premium erode every day, and works in favour of an option writer, who collects that decay; the time value of an option falls to zero at expiry, and theta tracks the pace of that fall. The decay is not steady: it accelerates sharply in the final days of a contract.

Time Decay on WebNotes

Theta decay