Option Theta Explained (Time Decay Visualized With Examples)

✅ New to options trading? Master the essential options trading concepts with the FREE Options Trading for Beginners PDF and email course: geni.us/option... 💰 Get up to $3,000 when you open and fund your first tastytrade brokerage account: geni.us/tastyt...
====
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!
=== RECOMMENDED VIDEOS/RESOURCES ===
Time Decay Explained: • Time Decay Explained (...
Stock Options Trading 101: • Stock Options Trading ...
Why Early Exercise/Assignment is Rare: • Early Options Assignme...
Options Trading For Beginners (PLAYLIST): • Become an Options Trad...
tastytrade Tutorials (PLAYLIST): • tastyworks Tutorials
Option Pricing EXPLAINED: • Option Prices EXPLAINE...
Options Trading 101: • Stock Options Trading ... tastytrade, Inc. (“tastytrade”) has entered into a Marketing Agreement with Project Finance(Marketing Agent”) whereby tastytrade pays compensation to Marketing Agent to recommend tastytrade’ brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastytrade and/or any of its affiliated companies. Neither tastytrade nor any of its affiliated companies is responsible for the privacy practices of Marketing Agent or this website. tastytrade does not warrant the accuracy or content of the products or services offered by Marketing Agent or this website. Marketing Agent is independent and is not an affiliate of tastytrade.