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Theta |
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Theta The ratio of the change in an option price to the decrease in time to expiration. Also called time decay.
Theta The decline in value of an option contract over the passage of time. Assuming all other factors (such as the price of the underlying security) remain constant, the price of the option will decline as the expiration date nears because it becomes less likely that the option will be in-the-money or out-of-the-money at expiration. Theta is an attempt to quantify this fact. It is important to note that because other factors do not always remain constant, the price of the option does not always decline according to the theta. How to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit webmaster's page for free fun content. |
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