Theta
The rate at which an option loses value as time passes, holding everything else constant.
Formula
Theta = Change in Option Price / Change in Time, conventionally expressed per calendar day and negative for a holder
Unit
₹
In depth
Theta is the daily rent paid by an option holder and collected by a writer, and it is the one Greek whose direction is certain — time only moves one way. Decay is not uniform: it accelerates as expiry nears and is concentrated in at-the-money strikes, so a position that decayed slowly for three weeks can lose most of its remaining value in three days. Theta and gamma are opposed by construction: a position that benefits from movement pays for the wait, and one that collects the wait is hurt by movement. Weekends count, so a Friday position pays three days of theta before Monday's open.
Worked example
A 24,000 call at 300 with theta of -8 loses about 8 points a day, or 8 x 75 = ₹600 per lot. Over a weekend that is roughly ₹1,800 with the index unchanged and nothing having happened.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Theta” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.