The "daily Call" From Option Alpha: Options Trading | Stock Options | Stock Trading | Trading Online

Hey everyone, Kirk here again and welcome back to the daily call. On today’s call, we are going to answer the question – “What is Theta decay in options trading and more importantly, how does it work or what do you need to be aware of?” Put very simply, Theta decay is one of the Greeks that’s involved in option pricing. Now, it doesn't tell you what an options price is, but rather, tells you what the options price could do over time as different factors change. Theta specifically refers to the time decay aspect of an option contract. I always think about it as E for Theta and T for time decay. That’s just a very simple way to associate them together. The time decay aspect or Theta decay of an options contract basically means that as options contracts near expiration, near their expiration date, they start to lose value at a faster and faster pace. It’s because the option contracts are wasting assets, meaning they have a finite life. They expire or end their life cycle at different expiration dates in the futu