What Is the Impact of Theta on a Short Options Position Used for Hedging?

A short options position, such as a covered call or a short put, benefits from Theta decay. As time passes, the option's premium decreases, which is a gain for the seller.

This gain can offset the cost of the underlying position or reduce the overall cost of the hedge. However, the seller is exposed to unlimited loss if the market moves unfavorably and the option is exercised.