What is 'Theta'
Theta is a measure of the rate of decline in the value of an option due to the passage of time. Theta can also be referred to as the time decay on the value of an option. If everything is held constant, then the option will lose value as time moves closer to the maturity of the option.
Theta is part of the group of measures known as the Greeks (other measures include delta, gamma and vega) which are used in options pricing.
BREAKING DOWN 'Theta'
For example, if the strike price of an option is $1,150 and theta is 53.80, then in theory the value of the option will drop $53.80 per day.
The measure of theta quantifies the risk that time imposes on options as options are only exercisable for a certain period of time. Time has importance for option traders on a conceptual level more than a practical one, so theta is not often used by traders in formulating the value of an option.
Theta is the 8th letter in the Greek alphabet.

Atlantic Spread
An options trading strategy that involves purchasing both an ... 
Charm
The rate at which the delta of an option or warrant will change ... 
Time Decay
The ratio of the change in an option's price to the decrease ... 
Gamma Neutral
A method of managing risk in options trading by establishing ... 
Time Value
The portion of an option's premium that is attributable to the ... 
European Option
An option that can only be exercised at the end of its life, ...

Options & Futures
Understanding Theta
In options trading, theta measures the daily rate of decline in an option’s value as it nears its expiration date. 
Options & Futures
Options Greeks: Theta Risk and Reward
by John Summa (Contact Author  Biography)Time value decay, the socalled "silent killer" of option buyers, can wipe a smile off the face of any determined trader once its insidious nature becomes ... 
Term
Measuring Options With the Greeks
Delta, gamma, theta and vega are “the Greeks,” and they provide a way to measure the sensitivity of an option’s price. 
Options & Futures
The Forex Greeks And Strategies
We look at the different kinds of Greeks and how they can improve your forex trading. 
Options & Futures
Options Pricing: The Greeks
Many option traders rely on the "Greeks" to evaluate option positions. The Greeks are a collection of statistical values that measure the risk involved in an options contract in relation to certain ... 
Options & Futures
Getting To Know The "Greeks"
Understanding price influences on options positions requires learning about delta, theta, vega and gamma. 
Options & Futures
Option Spreads: Selling And Buying To Form A Spread
By John Summa, CTA, PhD, Founder of OptionsNerd.comWhen you buy or sell a call or a put option, you are using only one option strike and, by definition, trading in a single contract month, with ... 
Options & Futures
Options Greeks: Options and Risk Parameters
by John Summa (Contact Author  Biography)This segment of the options Greeks tutorial will summarize the key Greeks and their roles in the determination of risk and reward in options trading. ... 
Options & Futures
Options Greeks: Conclusion
by John Summa (Contact Author  Biography)Greeks play a critical role in strategy behavior, most importantly in determining the prospects for success or failure. The key Greek risk factors  ... 
Options & Futures
The Basics Of Option Price
Options can be an excellent addition to a portfolio. Find out how to get started.

What does positive theta mean for credit spreads?
Learn about the option Greek theta and credit spreads, why credit spreads have positive thetas and what positive thetas signify ... Read Answer >> 
How is a short call used in a bear call spread option strategy?
Learn how a short call is used in a bear call spread option strategy, and see how a bear call spread benefits from the time ... Read Answer >> 
What is the average debt/equity ratio for the Internet sector?
Learn about how debit option spreads work, including their maximum profit and loss, and understand how time decay impacts ... Read Answer >> 
Do options make more sense during bull or bear markets?
Understand how options may be used in both bullish and bearish markets, and learn the basics of options pricing and certain ... Read Answer >> 
How do I change my strike price once the trade has been placed already?
Learn how the strike prices for call and put options work, and understand how different types of options can be exercised ... Read Answer >> 
What's the difference between a regular option and an exotic option?
Before learning about exotic options, you should have a fairly good understanding of regular options. Both types of options ... Read Answer >>