Theta Glossary
Plain-English definitions for common terms related to theta, options pricing, and time decay.
Theta
An option Greek that estimates how much an option's value may change as one day passes, all else equal.
Time decay
The tendency for an option's time value to decline as expiration approaches.
Option Greeks
Sensitivity measures used to estimate how option values may respond to different factors.
Delta
An estimate of how much an option's price may change for a one-point move in the underlying asset.
Gamma
An estimate of how much delta may change as the underlying price changes.
Vega
An estimate of how much an option's price may change when implied volatility changes.
Implied volatility
The volatility level implied by current option prices.
Extrinsic value
The portion of an option's price beyond intrinsic value, often associated with time and volatility.
Intrinsic value
The amount by which an option is in the money.
At the money
An option whose strike price is close to the current underlying price.
Expiration
The date after which an option no longer exists.
Contract multiplier
The number of underlying shares or units represented by one options contract.