What is Theta?
How much value an option loses with each passing day; the decay speeds up as expiration nears.
Animation · Theta
Learn “Theta” in an animated lesson
- Advanced Option StrategiesCalendar Spreads: Profiting from Different Decay Speeds
Sell a near-month option and buy a far-month option at the same strike. The near month's time value melts fast and the far month's slowly; if the stock sits near the strike, that speed difference is your profit.
- Advanced Option StrategiesStraddles and Strangles: Betting on a Big Move
Not sure whether it'll go up or down, only that it'll move a lot? Buy a call and a put together. Same strike is a straddle; different strikes is a strangle.
- Advanced Option StrategiesChoosing a Strategy from Your View
Answer two questions first: do you think it'll rise, fall or stay put? Will volatility grow or shrink? The answers lead you to the matching strategy.
- Options: Next StepsLEAPS Call vs. Short-Dated Call
For the same rise in the stock, why do a 30-day option and a 730-day LEAPS behave so differently?
- Options: Next StepsTime Decay (Theta)
Time value is like a melting ice cube: it shrinks every day, and melts faster the closer expiration gets.
Related terms
See how “Theta” works for yourself with an animation you can drag and play.
Go to “Calendar Spreads: Profiting from Different Decay Speeds”