How Does Time Decay (Theta) Affect the Profitability of the Overall Collar?

Time decay, or Theta, generally works in favor of the collar position. Since the investor is both long a put and short a call, the net effect of time decay is the difference in the Theta values.

Ideally, the net premium is received, meaning the sold call's Theta benefit (premium decay) is greater than the purchased put's Theta cost. Both options lose time value as expiration approaches.