OptionsOptions strategies

Options Theta

Written by Robin Bisarya
Thu Feb 18 2021
See how MarketXLS helps you take advantage in the markets.
Download Option Templates →

What is options theta?

The importance of options Greeks is hard to assess. But, according to most options traders, you get hooked once you start looking at them because they convey a tremendous amount of information about the price of an option. The most important ones are the delta and theta. Delta talks about the change in the price of an option, i.e., premium with the change in stock price, while theta tells how an option will be priced with time. Theta deals with the time decay of options.

Negative theta means the price of an option decreases with time and vice versa. For example, if an option’s theta is -0.20, that option’s price will fall $0.20/day. The price of the option will fall by $0.40 in two days and so on. Theta is always negative for an option buyer because the price of an option decreases as the stock price approaches the expiry date. The only way a buyer can gain is if the stock price surpasses the strike price. However, a seller can experience a positive theta as he can first sell an option and buy it at a lower price.

How is it calculated?

Theta or options Greeks as a whole are not just limited to derivatives (options in particular). The concept of Greeks has been there for ages, and they are extensively used in other finance areas. Black Scholes model is used to calculate all the option Greeks, including theta. However, according to the definition, theta can also be calculated by merely deriving an option’s value concerning time.

General formula:


V = value of the option (intrinsic + extrinsic)
t = time to expiry

How to use theta?

A seller can always get a positive theta, so he can keep selling OTM (out the money) calls. But a buyer is at a disadvantage as the theta is always negative. A buyer can minimize his risk by buying an ATM (at the money contracts) or at prices very near the expiry. He will also gain if the stock price surpasses the strike, also known as the intrinsic value of a stock. There are few strategies based on this concept, most significant being calendar spread, Iron Condor, and vertical spreads.

Volatility will play a significant role in defining the profitability of a particular contract. With minimal risk in the form of premium, options can be considered very lucrative when volatility is irrespective of which side the stock moves.

Using marketXLS

MarketXLS is an ad-on that can be embedded into MS excel to analyze stocks based on fundamentals. The package also includes option chains with all the information a standard chain provides. But the edge marketXLS has over its peers because the data can be directly imported into MS Excel, which is the most robust software for data analysis. Below is an option chain of MSFT (Microsoft Corporation). I have highlighted the column for theta for the expiry of 19 Feb 2021.

You can check when the theta is minimum and buy contracts accordingly. That way, you can minimize risk. There is also a column for implied volatility, which you can use to maximize profits.


In a nutshell, the concept is similar to the time value of money. Like, the value of money diminishes with time, the value of options also decreases when it gets nearer to the expiry date. Options theta works in favor of a seller and against a buyer. A buyer cannot take advantage of theta, however, he can minimize risk by buying ATM and maximize profits with the help of volatility.


None of the content published on marketxls.com constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person.

The author is not offering any professional advice of any kind. The reader should consult a professional financial advisor to determine their suitability for any strategies discussed herein.

the article is written for helping users collect the required information from various sources deemed to be an authority in their content. The trademarks if any are the property of their owners and no representations are made.


Learn more about theta calculation here.

Learn more about theta trading strategies here.

Interested in building, analyzing and managing Portfolios in Excel?
Download our Free Portfolio Template
Download Option Templates

Top 100 Gainers Today

Top 100 losers Today

Real gdpReal personal consumption expReal private investmentReal govt expenditureReal net exportsReal exportsReal importsFederal receiptsFederal outlaysFederal surplus or deficitFederal debtReal private investment nonresidentialReal private investment residentialReal potential gdpReal personal incomeReal personal consumption exp monthlyRpce durable goodsRpce nondurable goodsRpce servicesPersonal savings rateMonetary baseCurrency in circulationBank reservesMoney supply m1Money supply m2Sp500DjiaWilshire indexVixFinancial stress indexCorporate bond index aaCorporate bond index bbbFederal funds rateTreasury rate 3mTreasury rate 1yTreasury rate 5yTreasury rate 10yTips 5yTips 10yBond yield aaaBond yield baaMortgage rate 15yMortgage rate 30yUs dollar weighted averageUsdollar to euroUsdollar to poundYuan to usdollarCanadiandollar to usdollarYen to usdollarCpiCpi wo food energyCpi foodCpi energyChain price indexChain price index wo food energyGdp price deflatorPpi final demandPpi finished goodsPpi materialPpi crude goodsPpi final demand wo food energyPpi finished goods wo food energyHouse price indexHouse price index 20cityCrude oil priceGasoline priceNatural gas priceIndustrial productionCapacity utilisationInventoriesSales retail foodVehicle sales light weightManufacture orders durablesManufacture orders capital goodsLoansConsumer credit outstandingCorporate profitsHousing startsBuilding permitsResidential constructionEmployees nonfarmEmployees privateEmployees goods producingEmployees service providingEmployees governmentUnemployment rateInitial cliamsAverage weeks unemployedJob openingsHiresSeparationsQuitsLayoffs dischargesHours of productionHourly earningsReal outputPopulationLabor forceLabor force participation rate
Search for a stock

Top MarketXLS Rank stocks

Sanderson Farms Inc. logo

Sanderson Farms Inc.

Optionable: Yes
Market Cap: 4,908 M
Industry: Packaged Foods
52 week range    
Rush Enterprises Inc. Class B Common Stock logo

Rush Enterprises Inc. Class B Common Stock

Optionable: No
Market Cap: 2,753 M
Industry: Auto & Truck Dealerships
52 week range    
Gaming and Leisure Properties Inc. logo

Gaming and Leisure Properties Inc.

Optionable: Yes
Market Cap: 11,555 M
Industry: REIT - Diversified
52 week range    
General Mills Inc. logo

General Mills Inc.

Optionable: Yes
Market Cap: 42,311 M
Industry: Packaged Foods
52 week range    
National Retail Properties logo

National Retail Properties

Optionable: Yes
Market Cap: 7,768 M
Industry: REIT - Retail
52 week range    
Oppenheimer Holdings Inc. Class A (DE) logo

Oppenheimer Holdings Inc. Class A (DE)

Optionable: Yes
Market Cap: 421 M
Industry: Capital Markets
52 week range    
Kronos Worldwide Inc logo

Kronos Worldwide Inc

Optionable: Yes
Market Cap: 2,213 M
Industry: Specialty Chemicals
52 week range    
Cowen Inc. logo

Cowen Inc.

Optionable: Yes
Market Cap: 704 M
Industry: Capital Markets
52 week range    
BJ's Wholesale Club Holdings Inc. logo

BJ's Wholesale Club Holdings Inc.

Optionable: Yes
Market Cap: 8,600 M
Industry: Specialty Retail
52 week range    
Strategic Education Inc. logo

Strategic Education Inc.

Optionable: Yes
Market Cap: 1,760 M
Industry: Education & Training Services
52 week range    

More Features

Stand with Ukraine

As the situation in Ukraine escalates, many of us in MarketXLS are left with emotions too overwhelming to name. If you’d like to show your support, but aren’t sure how to, we want to help make it easier for you to act.

For any amount donated, we’ll extend your MarketXLS subscription for double of the donated amount. Please send proof of your payment to support@marketxls.com to avail the extention

From all of us at MarketXLS, thank you!