The Greeks – Theta

 Fill Your Trading Tool Chest

Theta – Measures the change in the option price due to time decay. 

               Theta is an estimate of how much value of an option decreases for every day that passes and there is no move in either the stock price or volatility. The option’s theta is a measurement of the option’s time decay.  Time decay occurs because the time value of options diminishes as time passes and expiration draws nearer. Positive theta means that the option will increase in value as time passes, while negative theta means that the option will decrease in value as time passes.