Time Decay with Options
Posted by Sid Li on 02 April 2018 04:12 PM

Theta 'T' is the characteristic of option prices to change purely as a result of the passage of time, and is known as time decay.

Theta is a measure of how time decay affects the option premium.

As such, theta is nearly always negative for bought options (although it can be positive for deep in the money puts in certain circumstances).

This makes sense because time decay erodes the option value as time to expiration diminishes.

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