Glossary Detail: Theta
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Backtesting Theta on High-Beta Names
Time decay — how much option value erodes per day. Always negative for option buyers; accelerates as expiration approaches.
Further Details:
Theta measures the rate of time decay in an option's value. Expressed as a negative number for long positions, it represents how much value the option loses per calendar day, all else being equal. A theta of -0.05 means the option loses $5 per day per contract.