The Greeks · Lesson 03 of 7 · Concept
Theta and time decay
Theta is the premium an option loses per day with everything else held still. The NIFTY 23,350 call on 23 September 2026, six days from expiry, carried a theta of −₹13.27 a day against a premium of ₹150.00 — about 8.8% of the contract’s value for each day that passed.
NIFTY 23,350 CE, 23 September 2026 · theta solved with Black-Scholes from the traded premium
Move it
Black-Scholes, not market data — the premiums elsewhere in this topic were traded, these are what the model returns for the inputs you set.
Black-Scholes, European exercise, 6.5% risk-free rate. These are model outputs, not traded prices.
Only time value decays
Theta applies to the time-value component of a premium and nothing else. A deep in-the-money contract is mostly intrinsic value and barely decays; an at-the-money contract is almost entirely time value and decays fastest. That is one fact, not two, and it follows directly from what time value is.
The chart above plots premium against days remaining, with expiry at the right-hand edge. The line is not straight. Time value falls with the square root of the time left, so halving the days remaining does not halve the premium — it multiplies it by about 0.71.
Drag the days control from six down towards zero and the steepening is the whole lesson. The last day removes more premium than the first three together.
Read against the contract, not in isolation
−₹13.27 a day is meaningless without the ₹150.00 it is charged against. As a share of the premium it is 8.8% per day at six days out, and that share rises every session as the premium shrinks and the daily loss does not shrink with it.
Theta is also a calendar measure rather than a trading-day one. Friday to Monday is three days of decay, not one, which the market prices partly into Friday’s close rather than leaving entirely to Monday’s open.
The same −₹13.27 is a credit to whoever wrote the contract. It is not free income: it is the compensation for carrying the gamma risk described in the previous lesson, and the two are priced against each other.
Common questions
What is theta in options?
Theta is the change in an option premium for the passage of one day, with everything else held constant. It is negative for a buyer and positive for a writer, and it applies only to time value.
How fast does an option lose value?
Time value falls with the square root of the time remaining, so decay accelerates as expiry approaches. A NIFTY at-the-money call six days out lost about 8.8% of its premium per day; on the final day the remaining time value goes to zero entirely.
Does theta apply over weekends?
Yes. Theta is measured in calendar days, so Friday to Monday is three days of decay. Markets price part of that into Friday’s close rather than showing it all as a Monday gap.
Written and maintained by MarketCue research · Updated 9:30 AM IST · 23 October 2026
How these figures are produced
Every price on these pages was traded on the exchange and is read from our own option-chain capture, which records the NIFTY and SENSEX chains once a minute through the session. Each page names the session its figures come from.
Figures that a model produced rather than the market — the Greeks, implied volatility — are labelled as model outputs wherever they appear, and never presented beside traded prices without saying which is which. The pricing is checked against published reference values on every change.
Where our own data cannot support a claim, the page says so instead of generalising. MarketCue is not a registered investment adviser, research analyst or broker under SEBI regulations.