Theta

Theta is an option Greek variable that measures the rate of decline in the value of an option due to the passage of time. It is also referred to as the time decay on the value of an option. If everything else remains constant, the option will lose value as time moves closer to the expiry of the option. It is generally expressed as a negative number reflecting the amount by which the option’s value will decrease every day. The measure of theta quantifies the risk that time imposes on options as options are only exercisable for a certain period of time. It indicates how much an option’s price will diminish over time.

Leave a Reply