Theta

Theta is a measure used in options trading that estimates how much the value of an option decreases over time, assuming all other factors stay constant. It's often called "time decay" because as the expiration date approaches, the option's potential to gain value diminishes, especially if the underlying asset's price doesn’t move favorably. For example, a Theta of -0.05 means the option’s price could decrease by about 5 cents each day, all else being equal. This helps traders understand how time affects their options positions and plan strategies accordingly.