What Is the Concept of “Theta Decay” and How Does It Benefit an Option Seller?

Theta decay is the measure of how much an option's value decreases each day due to the passage of time. As an option approaches expiration, its time value diminishes.

An option seller (writer) benefits from Theta decay because they receive the premium upfront, and the option's value naturally erodes over time, making it less likely to be exercised against them.