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What Is “Theta” in Options Trading?

Theta, also known as time decay, is one of the Greeks that measures the rate at which an option's value erodes as time passes, assuming all other factors remain constant. As an option approaches its expiration date, its time value decreases, which is reflected by Theta.

Long option positions have negative Theta (losing value daily), while short positions have positive Theta (gaining value daily).

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