How Does Time Decay (Theta) Impact the Value of a Crypto Option?

Time decay, represented by the Greek letter Theta, measures the rate at which an option's value declines as its expiration date approaches. This effect is detrimental to the option buyer and beneficial to the seller.

All else being equal, an option loses a small amount of its extrinsic value each day. The rate of decay accelerates as the expiration date gets closer, especially in the final month.

For this reason, options are often referred to as "wasting assets," as time is a constantly eroding factor on their price.