Theta

Theta is one of the options greeks which measures an option’s sensitivity to the time till expiration of the option. It is the change in the value of an option with respect to the passage of time, with everything else remaining the same.

   Theta = Change in an option price/ Change in time to expiration
 

                                                                   OR
 

Where, V is the option’s price and T is the time to expiry for the options contract.

Usually, theta is negative for a long option, whether it is a call or a put. Other things being equal, options tend to lose time value each day throughout their life. This is due to the fact that the uncertainty element in the price decreases.