what is theta in options

In options trading, theta refers to the rate of decline in the value of an option due to the passage of time, also known as time decay. It is part of the group of measures known as the Greeks, which are used in options pricing. Theta is generally expressed as a negative number for long positions and as a positive number for short positions. This means that an option loses value as time moves closer to its maturity, as long as everything else is held constant. Theta is quoted in dollars and represents the amount the options price will decrease each day. Theta value is smaller further away from expiration and is not constant--it accelerates the closer it gets to expiration. Theta is an advantage for the option seller and a disadvantage for the option buyer.