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The theta of an option is one of the four primary "option greeks." The other three are delta, gamma, and vega.

An option's theta is a measure of the option's expected price decay with the passage of one day (called time decay), holding the stock price and implied volatility equal.

Intrinsic value of an option is stable, but an option's extrinsic value decays (decreases) steadily with the passage of time.

At expiration, an option will only consist of intrinsic value (if any).

In this video, I explain what an option's theta is and show numerous trade examples to help visualize the decay of option extrinsic value as time passes.

Additionally, I discuss more advanced concepts, such as what position theta tells you about the expected performance of entire option positions.

Be sure to leave a comment down below with any questions you may have!

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