TL;DR
Theta is how much value an option loses every day just from time passing. A $3.00 option with −$0.05 theta is worth about $2.95 tomorrow if nothing else changes. That decay is why selling premium pays — and why holding long options as a lottery ticket bleeds.
Theta is the answer to one question: if nothing about the market changes overnight, how much will this contract be worth tomorrow? The number is always negative for the option holder and always — the same magnitude, opposite sign — positive for the seller. Time is the one variable that only moves one direction.
The sign tells you the seat
If you bought the contract, theta is your daily cost: every day takes a small bite out of what you paid. If you sold the contract, theta is your daily collection: every day, the buyer's contract is worth a little less, so the obligation you owe gets a little cheaper to close.
Same number, opposite seats. The wheel-seller writing cash-secured puts and the covered-call writer at the call wall are both explicitly betting on theta — they're collecting the time decay buyers are paying. It's the most reliable edge in options, because time is the one input that's guaranteed to move in their favor.
Decay accelerates near expiry
The shape isn't linear. A 60-day option loses pennies per day. A 7-day option loses real money per day. A 1-day option falls off a cliff. The math is square-root-of-time: theta grows as days-to-expiry shrinks, so the last week of an option's life is where most of the decay actually happens.
This is why most premium-selling lives in the
30–45 day window — long enough
that there's still meaningful premium to collect, short enough
that decay is moving every session. The
Premium board's MONTHLY
horizon badge is exactly this window: the canonical wheel-seller's
sweet spot.
How it shows up on a Runir page
Every row on the Premium board is a contract whose theta someone (you, if you sell) collects. The board ranks them by annualized yield — that's theta turned into dollars per year, normalized so a 7-day CSP and a 45-day CSP are comparable on the same axis.
The horizon badge tells you which seat you'd be taking:
WEEKLY is theta-scalper territory (high daily decay, high
assignment risk), MONTHLY is the canonical
30–45 day wheel window, and
LEAPS are theta-light positional trades. High annualized
yield without a small horizon badge usually means high decay relative
to premium — the math of the figure above, applied to a real row.
What it doesn't tell you
Theta assumes everything else stays still. In real conditions, three things are moving at once:
- IV moves (vega): a volatility spike re-prices the option upward and can overwhelm a few days of decay
- Spot moves (delta): a move into your strike erases the out-of-the-money premium you were collecting
- Theta itself accelerates: the same contract doesn't decay at the same dollar rate from day 30 to day 1 — it bites harder near the end
Theta is the cleanest Greek to reason about, but it's meaningless alone. Pair it with delta (probability of assignment) and IV (premium richness) for the full read on whether a row is worth selling.
What to do with this
Read what is delta? for the probability half of the wheel-seller's math — the two Greeks together describe almost everything a CSP-seller cares about. Then open today's Premium board to see where today's high-theta plays actually are.
Common questions
- What is theta in options?
- How much an option loses in value each day from time passing alone. A $3.00 option with −$0.05 theta is worth about $2.95 tomorrow if nothing else changes. It is negative for the buyer and positive for the seller.
- Why does theta decay accelerate near expiry?
- Time value follows a square-root-of-time curve, so theta grows as days-to-expiry shrink. Most of an option's decay happens in its final week — which is why premium-selling tends to live in the 30–45 day window.
