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THETA

Time decay: How much of the option buyer's premium is automatically eroding every passing day?

Published by The Retail Trader · JUL 31, 2026 · Derivatives (F&O)

Theta — Time decay: How much of the option buyer's premium is automatically eroding every passing day. This works in favor of the seller.

WHERE THIS FITS IN

This term comes under Derivatives (F&O), in the section "GREEKS and VOLATILITY". The Greeks explain what causes the price of an option to move and by how much - without knowing this, go on in option trading and here:

RELATED TERMS TO READ

Other terms in this group — understanding them together is more useful:
• Delta
• Gamma
• Vega
• Rho
• Implied Volatility (IV)
• IV Crush
• Historical Volatility
• India VIX
• Time Decay Curve

To read the entire group and all its examples in one place, see the journal "DERIVATIVES: DICTIONARY OF FUTURES & OPTIONS" - this term has been taken from there.

This entry is for educational purposes only and is not a recommendation to buy or sell. Exchanges change charges, margins, lot sizes and expiry rules from time to time, so verify any figures with your broker or exchange.

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