Theta (Time Decay)
The rate at which an option loses value each day due to the passage of time, all else being equal.
Explained Simply
Theta is expressed as a negative number for option buyers and a positive number for sellers. A theta of -0.05 means the option loses $0.05 of value per day. Theta decay is not linear — it accelerates as expiration approaches, especially in the final 2-3 weeks. This is why options buyers hate time passing and options sellers love it. The classic saying: "buy time, sell theta." For a 30-day option, roughly 50% of the remaining theta decay happens in the last 7 days.
How Tradewink Uses Theta (Time Decay)
Theta is a primary factor in our options strategy selection. When selling premium (iron condors, credit spreads), Tradewink targets the "theta sweet spot" — 21-45 days to expiration where theta decay is accelerating but risk is still manageable. The AI tracks total portfolio theta daily, ensuring the theta earned from premium-selling positions offsets any options buying costs.
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See Theta (Time Decay) in action
Tradewink uses theta (time decay) as part of its AI trading signal pipeline. Start getting signals that use this concept to find real opportunities.