Option theta represents an option’s expected price decay with each passing day. Theta decay is an extremely important concept to understand as an options trader.
As an option buyer or seller, you need to understand how an option’s price is expected to change over time. One of the option Greeks, theta, tells us how an option’s price is expected to decrease over time.
In this video, you’ll learn:
1. What an option’s theta represents
2. Why option prices decrease over time
3. Which options have the most exposure to time decay
4. How at-the-money option decay becomes more significant as expiration approaches
5. How in-the-money and out-of-the-money option decay becomes less significant as expiration approaches.
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