What Is ‘Time Decay’ or ‘Theta’ in Options?

Time decay, represented by the option Greek Theta, is the measure of the rate at which an option's time value erodes as the expiration date approaches. Theta is typically a negative number, meaning the option loses value each day, all else being equal.

The rate of decay accelerates significantly as the option gets closer to its expiration date, making time a critical factor in option pricing and strategy.