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Theta measures how much an option's price is expected to fall each day purely from the passage of time, with everything else held constant — commonly called "time decay."

Theta is almost always a negative number for an option you own — an option loses a little value every single day just by getting closer to expiry, even if the underlying doesn't move at all. A Theta of −14.5 means the option is expected to lose about 14.5 points of value over the next day, all else equal. For a position where you've sold the option, Theta flips sign — time decay works in your favor, not against you, which is the whole basis of every credit-based strategy on this site.

1. For a bought option, Theta is a daily cost. It's the price of holding the position another day, separate from whatever the underlying does.
2. For a sold option, Theta is a daily gain. Every day that passes without the underlying moving against you is a day you keep more of the premium collected.
3. Theta is quoted per day, and typically assumes calendar days (including weekends), though the actual decay a trader experiences is concentrated on trading days.

Using the same setup as the Delta and Gamma pages: Nifty at 24,000, 7 days to expiry, 13% implied volatility. The at-the-money 24,000 call has a Theta of -14.512 per day.

1. One day passes, with Nifty unchanged at 24,000.
2. Theta predicts the option loses roughly 14.512 points of value, or ₹943.28 at a 65 lot size, purely from that one day passing.
3. This is a genuine, checked estimate, not just a formula's output taken on faith — recomputing the option's full Black-Scholes price with one fewer day to expiry (holding spot and IV fixed) gives a very close, though not perfectly identical, actual price drop. The small gap is expected: Theta is a rate measured at a single instant, while a full day is not infinitesimally small.

Using the same Nifty setup across a range of strikes:

Like Gamma, Theta peaks at the at-the-money strike and falls off on both sides — at-the-money options have the most extrinsic (time) value to lose, so they have the most to decay each day. Unlike Gamma, though, call Theta and put Theta at the same strike are not identical (−14.512 vs −10.243 at the 24,000 strike) — a real difference driven by the risk-free rate term in the pricing formula, not a rounding artifact.

Holding spot, strike (at-the-money, 24,000), and 13% IV fixed, and only changing days to expiry:

Theta grows sharply as expiry nears — from −8.2 per day at 30 days out to −34.7 per day at 1 day out, over a 4x increase. This is the same underlying mechanism behind Gamma's own acceleration near expiry (covered on the Gamma page): time value has less and less time left to be spread over, so it drains away faster and faster as the countdown to expiry shortens.

Using the exact strikes from this site's own Iron Condor worked example (spot 24,000, 7 DTE, 13% IV):

Summing the position Theta column: 6.707 − 3.794 + 9.501 − 5.750 = +6.665 per share, or roughly +₹433.21 per day at a 65 lot size. The net Theta is positive — this Iron Condor genuinely gains value every day that passes with Nifty staying roughly where it is, confirming with real computed numbers exactly why credit-based, range-bound strategies like this one are described as "theta-positive" or "income" trades.

Theta is arguably the single most defining feature separating the strategies on this site into two broad camps:

• Net option buyers are theta-negative — a Long Call, Long Straddle, or Long Guts all lose value each day the underlying doesn't move enough, purely from time decay.
• Net option sellers are theta-positive — a Short Straddle, Iron Condor, or Bull Put Spread all gain value each day the underlying stays roughly put, confirmed directly above for the Iron Condor.
• This is the core trade-off behind every "collect premium" strategy on this site: theta-positive positions are paid for taking on the risk of a larger, faster move than the market currently expects.

• Theta decay is not linear and not guaranteed day-to-day. It accelerates sharply near expiry, as shown above, and a single large move in the underlying can easily overwhelm a day or more of theta gain or loss.
• A theta-positive position isn't automatically a good trade. It's collecting a premium specifically because it's taking on real directional or volatility risk — the numbers above show the decay, not the risk of the underlying moving hard against the position.
• Theta assumes everything else stays fixed, including implied volatility — a change in IV can easily swamp a day's worth of theta, which is exactly what Vega measures.