A measure (first-order greek) of the rate of change in the value of an option with respect to the passage of time. The theta of a call or a put is usually negative because the value of the option decreases as time passes, holding the price of the underlying asset and its volatility unchanged. Theta can also be defined as the time decay on the value of an option. For example, if the strike price of an option is $1200 and theta is 62.5, then theoretically the value of the option will fall $62.5 per day.

Theta quantifies the risk that time exposes options to as options can only be exercised for a specific period of time up to expiration (or solely at expiration for European options). Time is key for option traders on a conceptual level more than a practical one, so theta is not often used by traders or investors in formulating the option value.