Skip to main content

What Is the Practical Implication of Accelerated Theta Decay for an Option Seller?

Accelerated theta decay is highly beneficial for an option seller, particularly in the final weeks before expiration. It means the option's value collapses rapidly, allowing the seller to profit from the time erosion.

The seller can either buy back the option for a much lower price or wait for it to expire worthless, capturing the maximum profit.

Why Does Theta Decay Accelerate as an Option Approaches Expiration?
Why Is Theta Decay Generally Non-Linear, Accelerating Closer to Expiration?
What Types of Offsetting Positions Are Most Beneficial for Portfolio Margining?
Under What Circumstances Would an Early Exercise of an American Option Be Beneficial?