What Is the Concept of ‘Time Decay’ (Theta) in Options Pricing?

Time decay, or Theta, is one of the "Greeks" in options trading and represents the rate at which an option loses its extrinsic (time) value as it approaches its expiration date. All else being equal, an option's value decreases every day because there is less time for the underlying asset's price to move favorably.

Theta is a negative value for long option positions and is one of the most predictable factors in options pricing.