Describes the change in value of an Option over time.
The change in value stems from the reduction in the time to expiration and hence the reduction in the life of the Option.
An approximation of the decrease in the price of an Option over a period of time when all other factors are held constant.
Theta is generally expressed on a daily basis. For example, if a call has a price of USD3.00 and a theta of 0.10, one day later, with all else unchanged, the call would have a price of USD2.90 (USD3.00 - (.10 x 1)).
Generated by a mathematical model, Theta depends on the stock price, strike price, volatility, interest rates, dividends, and time to expiration.