Option Theta (Time Decay)
Theta is the premium an option loses in one day if the underlying and volatility stay where they are. A theta of −12 on a NIFTY option means about ₹12 per unit, or ₹780 per 65-unit lot, gone by tomorrow.
Time decay is not linear
An option loses value slowly when expiry is weeks away and fast in the last few days. At the money, decay is steepest in the final week; far out-of-the-money options lose most of what is left on expiry day itself.
Buyers pay theta, sellers earn it
A long option has negative theta: every day costs money unless the underlying moves. A short option has positive theta, which is why option sellers like quiet markets, and why they need protection when the market moves.
Theta on expiry day
On expiry day an option with no intrinsic value is worth nothing at the close, so its whole remaining premium decays that day.
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What-if values and the chart use the Black-76 model on the future (rate as set, calendar days), so they can differ slightly from the app's live Greeks.
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Frequently asked questions
Why does theta increase near expiry?
Time value is roughly proportional to the square root of the time left, so each day removes a larger share of what remains as expiry approaches. The last week, and especially the last day, carry the steepest decay.
Is theta the same every day of the week?
Theta is quoted per calendar day. Over a weekend the market prices in the lost days, so Monday's premium often already reflects Saturday and Sunday.
The other Greeks
For information only, not investment advice. Disclaimer