# Define "Theta" and Its Impact on Option Value over Time ⎊ Path

**Published:** 2025-12-05
**Author:** Greeks.live
**Categories:** Path

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## Define “Theta” and Its Impact on Option Value over Time.

Theta is the "time decay" Greek, measuring the decrease in an option's price for every day that passes, all else being equal. It is always negative for long option positions.

Theta decay accelerates as the option approaches expiration, meaning the option loses value at an increasing rate, particularly impacting Out-Of-The-Money and At-The-Money options.

- [Define Theta in the Context of Option Pricing](https://learn.greeks.live/path/define-theta-in-the-context-of-option-pricing/)

- [Does Theta Increase or Decrease as an Option Approaches Expiration?](https://learn.greeks.live/path/does-theta-increase-or-decrease-as-an-option-approaches-expiration/)

- [How Does the Passage of Time, or ‘Theta’, Impact the Time Value of an American Option?](https://learn.greeks.live/path/how-does-the-passage-of-time-or-theta-impact-the-time-value-of-an-american-option/)

- [How Does the Time Decay (‘theta’) Affect Option Prices?](https://learn.greeks.live/path/how-does-the-time-decay-theta-affect-option-prices/)

- [How Does the Time to Expiration (Theta) Interact with IV to Affect the Bid-Ask Spread of an Option?](https://learn.greeks.live/path/how-does-the-time-to-expiration-theta-interact-with-iv-to-affect-the-bid-ask-spread-of-an-option/)

- [Does Theta Accelerate or Decelerate near Expiration?](https://learn.greeks.live/path/does-theta-accelerate-or-decelerate-near-expiration/)

- [What Is ‘Theta’ in Options Trading and How Does It Relate to the Passage of Time?](https://learn.greeks.live/path/what-is-theta-in-options-trading-and-how-does-it-relate-to-the-passage-of-time/)

- [Explain the Concept of “Theta Decay” and Its Impact on an Option’s Premium](https://learn.greeks.live/path/explain-the-concept-of-theta-decay-and-its-impact-on-an-options-premium/)

## Glossar

### [Option Value](https://learn.greeks.live/area/option-value/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)

Measure ⎊ Option Value represents the total market price of the derivative contract, encapsulating both its immediate intrinsic worth and its potential future worth based on time and volatility.

### [Theta](https://learn.greeks.live/area/theta/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)

Decay ⎊ Theta, within cryptocurrency options and financial derivatives, quantifies the rate of extrinsic value loss as time passes, representing a critical component of options pricing models.

## Discover More

### [How Does 'Time Decay' (Theta) Affect the Value of a Cryptocurrency Option?](https://learn.greeks.live/path/how-does-time-decay-theta-affect-the-value-of-a-cryptocurrency-option/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Does 'Time Decay' (Theta) Affect the Value of a Cryptocurrency Option?](https://learn.greeks.live/wp-content/uploads/2025/10/Aerodynamic-Unfolding-Mechanism-Representing-Modular-Digital-Asset-Settlement-Infrastructure-Evolution.webp)

Time Decay (Theta) is the erosion of an option's value as it nears expiration, a constant drag on the option buyer.

### [How Does the Theta of an Option Interact with Its Vega near Expiration?](https://learn.greeks.live/path/how-does-the-theta-of-an-option-interact-with-its-vega-near-expiration/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Does the Theta of an Option Interact with Its Vega near Expiration?](https://learn.greeks.live/wp-content/uploads/2025/10/Macro-Illumination-of-Digital-Asset-Volatility-Surface-Monitoring-AquaTinged-Indicator-Line.webp)

Near expiration, both Theta (decay) and Vega (sensitivity to IV) accelerate their decay, creating a high-cost environment for long option holders.

### [If an Option's Premium Is $500 and Its Intrinsic Value Is $300, What Is Its Time Value?](https://learn.greeks.live/path/if-an-options-premium-is-500-and-its-intrinsic-value-is-300-what-is-its-time-value/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![If an Option's Premium Is $500 and Its Intrinsic Value Is $300, What Is Its Time Value?](https://learn.greeks.live/wp-content/uploads/2025/10/Precise-Bifurcation-of-Synthetic-Asset-Obligation-Between-Bouncing-Liquidity-Pools.webp)

Time Value = Premium - Intrinsic Value; the time value is $200.

### [What Other Greek, besides Theta, Is a Primary Driver of an Option's Extrinsic Value?](https://learn.greeks.live/path/what-other-greek-besides-theta-is-a-primary-driver-of-an-options-extrinsic-value/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Other Greek, besides Theta, Is a Primary Driver of an Option's Extrinsic Value?](https://learn.greeks.live/wp-content/uploads/2025/10/Articulated-Dynamic-Actuator-Assembly-Modeling-Volatility-Surface-Convexity-in-Decentralized-Finance-Instruments.webp)

Vega is the other primary driver, as it measures the option's sensitivity to Implied Volatility (IV), which is a key component of extrinsic value.

### [How Does Vesting Impact the Circulating Supply of a Token over Time?](https://learn.greeks.live/path/how-does-vesting-impact-the-circulating-supply-of-a-token-over-time/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Does Vesting Impact the Circulating Supply of a Token over Time?](https://learn.greeks.live/wp-content/uploads/2025/10/Layered-Stack-of-Cryptocurrency-Quant-Hedging-Volatility-Swap-Payoffs-Visualized-Through-Component-Isolations.webp)

Controls the gradual, predictable increase of tokens into the market, managing inflation and mitigating sudden sell-offs.

### [How Does High Volatility in a Cryptocurrency like Ethereum Impact the Time Value of an ATM Option?](https://learn.greeks.live/path/how-does-high-volatility-in-a-cryptocurrency-like-ethereum-impact-the-time-value-of-an-atm-option/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Does High Volatility in a Cryptocurrency like Ethereum Impact the Time Value of an ATM Option?](https://learn.greeks.live/wp-content/uploads/2025/10/Asymmetric-Equilibrium-Depicting-Digital-Asset-Volatility-Surface-Hedging-Strategies.webp)

High volatility increases the probability of moving ITM, thus increasing the ATM option's time value.

### [Explain the Concept of "Theta Decay" and Its Impact on Option Value](https://learn.greeks.live/path/explain-the-concept-of-theta-decay-and-its-impact-on-option-value/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![Explain the Concept of "Theta Decay" and Its Impact on Option Value](https://learn.greeks.live/wp-content/uploads/2025/10/Microscopic-View-of-DeFi-Liquidity-Pool-Front-End-Module-Reflecting-Token-Implied-Volatility-Surface.webp)

The non-linear erosion of an option's extrinsic value as time to expiration decreases, accelerating near the end.

### [How Does a High IV Environment Affect the Time Decay (Theta) of an Option?](https://learn.greeks.live/path/how-does-a-high-iv-environment-affect-the-time-decay-theta-of-an-option/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Does a High IV Environment Affect the Time Decay (Theta) of an Option?](https://learn.greeks.live/wp-content/uploads/2025/10/Geometric-Abstraction-Modeling-Time-Decay-and-Volatility-Surfaces-in-Decentralized-Finance-Pricing.webp)

High IV increases the option's extrinsic value, which in turn increases the absolute amount of daily time decay (Theta).

### [What Is "Theta" and How Does It Measure Time decay'S Effect on an Option's Value?](https://learn.greeks.live/path/what-is-theta-and-how-does-it-measure-time-decays-effect-on-an-options-value/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Is "Theta" and How Does It Measure Time decay'S Effect on an Option's Value?](https://learn.greeks.live/wp-content/uploads/2025/10/Abstract-Volumetric-Visualization-of-Cryptocurrency-Options-Hedging-Strategy-Implementation-Across-Decentralized-Exchanges.webp)

Theta is an options Greek that quantifies the daily monetary decay of an option's premium due to the passage of time.

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**Original URL:** https://learn.greeks.live/learn/define-theta-and-its-impact-on-option-value-over-time/
