Glossary › theta

Trading glossary · advanced

theta

How much value a buy-or-sell ticket loses every day just because time is passing.

The fuller meaning

An option's time decay: the loss of time value as expiry approaches, all else equal. It speeds up in the final weeks, and at-the-money options have the most exposure to it; buyers must be right about direction and timing to beat it, while sellers collect it.

theta, also called time decay.

Related words

at the money · backtest · backwardation · basis · call option · contango · data snooping · delta · edge · entry trigger