# How Does Time Decay (Theta) Affect the Value of an Option? ⎊ Path

**Published:** 2025-12-04
**Author:** Greeks.live
**Categories:** Path

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## How Does Time Decay (Theta) Affect the Value of an Option?

Time decay, or Theta, is one of the "Greeks" and represents the rate at which an option's value erodes as its expiration date approaches. Options are wasting assets; as time passes, the probability of the option expiring in-the-money decreases, causing its time value to decline.

This decay accelerates significantly in the final weeks before expiration. Time decay is a constant drag on the value of a long option position.

- [How Does Theta Impact the Value of an Option as Its Expiration Date Approaches?](https://learn.greeks.live/path/how-does-theta-impact-the-value-of-an-option-as-its-expiration-date-approaches/)

- [Define “Theta Decay” and How It Impacts OTM Options as Expiration Approaches](https://learn.greeks.live/path/define-theta-decay-and-how-it-impacts-otm-options-as-expiration-approaches/)

- [What Is the Concept of “Time Decay” (Theta) in Options Trading?](https://learn.greeks.live/path/what-is-the-concept-of-time-decay-theta-in-options-trading/)

- [How Does Vega Change as an Option Approaches Its Expiration Date?](https://learn.greeks.live/path/how-does-vega-change-as-an-option-approaches-its-expiration-date/)

- [What Is the Relationship between Gamma and the Expiration Date?](https://learn.greeks.live/path/what-is-the-relationship-between-gamma-and-the-expiration-date/)

- [What Is “Time Decay” (Theta) and How Does It Affect the Premium?](https://learn.greeks.live/path/what-is-time-decay-theta-and-how-does-it-affect-the-premium/)

- [Explain the Relationship between Theta and the Calendar Days Remaining until Expiration](https://learn.greeks.live/path/explain-the-relationship-between-theta-and-the-calendar-days-remaining-until-expiration/)

- [How Does Theta Affect the Value of an Option as Expiration Approaches?](https://learn.greeks.live/path/how-does-theta-affect-the-value-of-an-option-as-expiration-approaches/)

## Glossar

### [Time Decay](https://learn.greeks.live/area/time-decay/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)

Decay ⎊ The inherent characteristic of options contracts, time decay, or Theta, represents the erosion of an option's value as it approaches its expiration date.

## Discover More

### [How Does the Concept of Time Decay (Theta) Affect an Options Price?](https://learn.greeks.live/path/how-does-the-concept-of-time-decay-theta-affect-an-options-price/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Does the Concept of Time Decay (Theta) Affect an Options Price?](https://learn.greeks.live/wp-content/uploads/2025/10/Decentralized-Finance-Volatility-Surface-Modeling-Through-High-Frequency-Trading-Chronometers.webp)

Theta is the rate at which an option's extrinsic value decreases as its expiration date approaches, causing its price to erode.

### [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.

### [What Is the Concept of 'Time Decay' (Theta) in Option Pricing?](https://learn.greeks.live/path/what-is-the-concept-of-time-decay-theta-in-option-pricing/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Is the Concept of 'Time Decay' (Theta) in Option Pricing?](https://learn.greeks.live/wp-content/uploads/2025/10/Symmetrical-Cross-Structure-Illuminating-Cryptocurrency-Derivatives-Quantum-Mechanics-Through-Algorithmic-Execution-Paths.webp)

Time decay (Theta) is the daily erosion of an option's extrinsic value as the expiration date approaches, lowering the option's price.

### [Why Are Weekly Crypto Options Particularly Susceptible to Rapid Theta Decay?](https://learn.greeks.live/path/why-are-weekly-crypto-options-particularly-susceptible-to-rapid-theta-decay/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![Why Are Weekly Crypto Options Particularly Susceptible to Rapid Theta Decay?](https://learn.greeks.live/wp-content/uploads/2025/10/Symmetrical-Financial-Instrument-Metaphor-Illustrating-Delta-Hedging-Dynamics-Across-Impermanent-Loss-Curves.webp)

Weekly options are on the steepest part of the Theta decay curve, leading to a rapid loss of extrinsic value.

### [How Does the Concept of "Extrinsic Value" Relate to Theta Decay?](https://learn.greeks.live/path/how-does-the-concept-of-extrinsic-value-relate-to-theta-decay/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Does the Concept of "Extrinsic Value" Relate to Theta Decay?](https://learn.greeks.live/wp-content/uploads/2025/10/Metallic-Lever-Mechanism-Representing-Volatility-Skew-Adjustment-in-Decentralized-Finance-Instruments.webp)

Theta decay is the erosion of the option's extrinsic (time) value, which disappears completely by expiration.

### [How Does Implied Volatility Affect the Time Value of an Option?](https://learn.greeks.live/path/how-does-implied-volatility-affect-the-time-value-of-an-option/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Does Implied Volatility Affect the Time Value of an Option?](https://learn.greeks.live/wp-content/uploads/2025/10/Symmetrical-Crossover-Mechanism-Visualizing-Volatility-Surface-Cross-Sectional-Derivatives-Pricing.webp)

Higher implied volatility increases an option's time value because it suggests greater potential for price movement.

### [At What Point in an Option's Life Is Theta Decay the Highest?](https://learn.greeks.live/path/at-what-point-in-an-options-life-is-theta-decay-the-highest/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![At What Point in an Option's Life Is Theta Decay the Highest?](https://learn.greeks.live/wp-content/uploads/2025/10/Dual-Compact-Disc-Obfuscation-Modeling-Implying-Hedged-Digital-Asset-Volatility-Surface-Compression.webp)

Theta decay is highest for ATM options with very short time to expiration, especially in the final 30 to 45 days.

### [What Is "Time Decay" (Theta) and How Does It Benefit the Call Seller?](https://learn.greeks.live/path/what-is-time-decay-theta-and-how-does-it-benefit-the-call-seller/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Is "Time Decay" (Theta) and How Does It Benefit the Call Seller?](https://learn.greeks.live/wp-content/uploads/2025/10/Deconstructed-Algorithmic-Financial-Instrument-Assembly-Utilizing-Modular-Option-Stratagem-Layering.webp)

The loss of an option's extrinsic value over time; it benefits the seller because the short option becomes cheaper.

### [Does Implied Volatility Affect the Non-Linearity of Theta Decay?](https://learn.greeks.live/path/does-implied-volatility-affect-the-non-linearity-of-theta-decay/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![Does Implied Volatility Affect the Non-Linearity of Theta Decay?](https://learn.greeks.live/wp-content/uploads/2025/10/Abstract-Digital-Asset-Volatility-Surface-Modeling-Through-Spherical-Option-Payoff-Representations.webp)

IV does not change the non-linear nature, but higher IV makes the absolute amount of decay larger and the acceleration more pronounced.

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