OPTION GREEKS : THETA (θ)

THETA (θ)

Theta measures the change in options price per day change in time to expiry. If theta is -3.87 that signify that for each day passes towards expiry the options price will decrease by 3.87.

Theta important Points:

- Theta of Option is always negative.

- Theta of Call and Put Option is same. (If rate of interest is not considered into calculation)

- Theta is highest at ATM and decreases as Nifty moves away.

- Theta of Future is 0.

When you buy Call Option, Negative Theta multiplies by Positive Quantity, hence gives Negative Portfolio Theta. This signifies that buying Call Option means Short Theta Position.

When you sell Call Option, Negative Theta multiplies by Negative Quantity, hence gives Positive Portfolio Theta. This signifies that Selling Call Option means Long Theta Position.

When you buy Put Option, Negative Theta multiplies by Positive Quantity, hence gives Negative Portfolio Theta. This signifies that buying Put Option means Short Theta Position.

When you sell Put Option, Negative Theta multiplies by Negative Quantity, hence gives Positive Portfolio Theta. This signifies that Selling Put Option means Long Theta Position.

Value of Theta increases as the Option moves from Out of the money to At the money and decreases as the Option moves from At the money to In the money Option.

Buy Call	Theta Short
Sell Call	Theta Long
Buy Put	Theta Short
Sell Put	Theta Long