What Is “Theta” in Options Trading and How Does It Relate to Time Value?

Theta is one of the option Greeks, representing the rate at which an option's time value decays as it approaches expiration. It measures the change in the option price for a one-day decrease in time to expiration.

Theta is typically a negative number for long option positions, meaning the option loses value each day, reflecting the decay of its time value. This decay accelerates as expiration nears.