Options trading
Theta
Definition
Theta is the estimated change in an option's price for one day passing, with nothing else changing. For a buyer it is negative, and the decay speeds up as expiration approaches.
Example
Say an option costs $2.00 and shows a theta of −0.05. If the stock price and implied volatility stay the same, it would be worth about $1.95 tomorrow, a $5 loss per contract. With a week left, the same option might show a theta of −0.15, losing about $15 per contract each day.
Hypothetical numbers, for illustration only.
Also defined in
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