Theta

Theta measures how much an option's price decreases each calendar day due to the passage of time, all else being equal. It's expressed in dollars per day per share, multiply by 100 for the per-contract impact.

An option with a theta of −0.05 loses $5 in value every day purely from time passing.

Why it matters: Theta is the engine behind income strategies. When you sell options, theta works in your favor, the option you sold loses value each day, which represents profit for you. When you buy options, theta works against you, your position erodes daily even if the stock doesn't move.

Theta acceleration: Theta is not linear. It accelerates as expiration approaches. An ATM option with 45 days to expiry might have a theta of −$0.03. The same option with 7 days to expiry might have a theta of −$0.12. This is why the final two weeks before expiration are where the most time value decay occurs.

The 45-day rule: Many professional options sellers prefer to sell options with 30 to 45 days to expiration and close at 50% of max profit. This captures the steepest part of the theta decay curve while avoiding the whippy gamma risk of very short-dated options.

Example: You sell a covered call and collect $2.00 in premium. The call has a theta of −$0.05. Each day that passes without the stock hitting your strike, the call loses $5 in value, profit that moves toward your pocket.

Related terms: Time value, extrinsic value, 0DTE, Vega, gamma

Try it on Stryke: Filter by theta in the Options Screener to identify high-decay positions.