Time Decay: Why Selling Beats Buying
How theta works in your favor when you sell options for income
What Is Theta?
Theta measures how much an option's value decreases each day, all else being equal. It is also called time decay. Every option loses value as it approaches expiration because there is less time for the stock to move favorably.
A theta of -0.05 means the option loses $0.05 per day (or $5 per contract). This decay accelerates as expiration approaches.
Why Sellers Love Theta
When you sell an option, theta works in your favor. Every day that passes, the option you sold becomes cheaper — bringing you closer to keeping the full premium. This is why income-focused traders prefer selling options: time is literally on their side.
The Acceleration Curve
Time decay is not linear. Options lose value slowly at first, then increasingly fast in the final 30 days before expiration. The last two weeks see the steepest decay. This is why many sellers target 30-45 days to expiration — capturing the sweet spot of rapid decay while allowing time to manage the position.
Theta and Strategy Selection
Understanding theta helps you choose the right strategy. If you are buying options, you are fighting time decay and need the stock to move quickly. If you are selling, you want the stock to stay calm while time does the heavy lifting.
Key Terms
Theta — The daily rate of time decay for an option
Time Value — The portion of an option's price attributable to remaining time
Intrinsic Value — The portion of an option's price from being in-the-money
DTE (Days to Expiration) — The number of days until an option expires