Theta
The premium an option loses per day from the passage of time alone. Negative for buyers, and it accelerates into expiry.
Also called: time decay · theta decay · option theta
What it means
Theta is the rate at which an option's extrinsic value erodes as expiry approaches. A buyer pays it every day the position is held; a seller collects it. Nothing has to happen in the market for it to apply.
The decay is not linear. It accelerates sharply in the final days, which is why a cheap near-expiry option can lose most of its value in a session while the underlying barely moves. Weekly expiries concentrate this effect.
Theta is also the clearest reason a correct view can lose. If the move takes longer to arrive than the premium allows, the position is wrong on P&L while being right on direction.
How OptionLab Pro’s engine uses it
In the live engine
Theta is computed per leg with Black-Scholes in the same pass as delta and gamma. The portfolio scenario engine reports an overnight theta card in rupees alongside spot shocks, because a number in rupees is a decision input in a way that a per-unit Greek is not.
go/internal/optionchain/greeks.go · go/internal/portfolio/scenarios.goThe common mistake
Where traders get this wrong
Buying weekly options for a view that needs several days to resolve. The decay profile and the thesis timeline have to match; a multi-day thesis funded by a two-day option is a bet on timing, not on direction.
Go deeper
There is a full lesson on this in the Academy, with an interactive widget and a Hindi translation.
Related terms
Educational and analytical content only. OptionLab Pro is not a SEBI-registered investment adviser or research analyst and does not give buy or sell recommendations. Derivatives trading carries a high risk of loss.