What Is Theta and How Does It Relate to Options on Volatile Crypto Assets?

Theta is the rate at which an option's value decays due to the passage of time. It is a negative value for long option positions, meaning the option loses value daily.

For volatile crypto assets, Theta decay accelerates significantly as the option approaches expiration, especially for out-of-the-money options. High volatility can temporarily mask Theta's effect, but it remains a certainty, making short-dated options riskier to hold.