Glossary
Theta
Theta is an option Greek that estimates time decay in an option contract.
Written byAdmin
Reviewed forClarity and risk framing
Last updated2026-05-04
Definition
Theta estimates how much value an option may lose from the passage of time, all else equal.
Real Example
If an option has a theta of -0.05, it may lose about $0.05 per share per day from time decay, before considering other changes.
Risks
Theta is not linear. Time decay can accelerate near expiration, especially for at-the-money options.
FAQ
Is theta good for option sellers?
Theta can help option sellers, but selling options still involves directional, volatility, liquidity, and assignment risks.