What is theta decay in options?
Derivatives
Theta decay is the gradual loss of an option’s time value as it approaches its expiry date, even if the underlying stock’s price doesn’t move.
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Decay accelerates in the final weeks before expiry, working against option buyers (who lose value over time) and in favor of option sellers (who collect that eroding premium). Understanding theta is essential for timing when to buy or sell options relative to expiry.
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