Theta Calculator

✖Change in Option Premium refers to the fluctuation in the price of an options contract due to alterations in factors such as the underlying asset's price, implied volatility, or interest rates.ⓘ Change in Option Premium [ΔV]			+10% -10%
✖Change in Time to Maturity refers to adjustments in the remaining duration of a financial instrument, influencing its value and risk profile.ⓘ Change in Time to Maturity [Δt]			+10% -10%

✖Theta measures the rate of change in the option price in relation to the passage of time, indicating how much the option's value decreases as time passes.ⓘ Theta [θ]

⎘ Copy

👎

Formula

✖

Theta

Formula

`"θ" = -"ΔV"/"Δt"`

Example

`"-5"=-"2.5"/"0.5"`

Calculator

LaTeX

Reset

👍

Download International Finance Formulas PDF PDF Image

Theta Solution

STEP 0: Pre-Calculation Summary

Formula Used

Theta = -Change in Option Premium/Change in Time to Maturity
θ = -ΔV/Δt
This formula uses 3 Variables

Variables Used

Theta - Theta measures the rate of change in the option price in relation to the passage of time, indicating how much the option's value decreases as time passes.
Change in Option Premium - Change in Option Premium refers to the fluctuation in the price of an options contract due to alterations in factors such as the underlying asset's price, implied volatility, or interest rates.
Change in Time to Maturity - Change in Time to Maturity refers to adjustments in the remaining duration of a financial instrument, influencing its value and risk profile.

STEP 1: Convert Input(s) to Base Unit

Change in Option Premium: 2.5 --> No Conversion Required
Change in Time to Maturity: 0.5 --> No Conversion Required

STEP 2: Evaluate Formula

Substituting Input Values in Formula

θ = -ΔV/Δt --> -2.5/0.5

Evaluating ... ...

θ = -5

STEP 3: Convert Result to Output's Unit

-5 --> No Conversion Required

FINAL ANSWER

-5 <-- Theta

(Calculation completed in 00.004 seconds)

You are here -

Home » Financial » International Finance » Theta

Credits

Created by Keerthika Bathula

Indian Institute of Technology, Indian School of mines, Dhanbad (IIT ISM Dhanbad), Dhanbad

Keerthika Bathula has created this Calculator and 50+ more calculators!

Verified by Nayana Phulphagar

Institute of Chartered and Financial Analysts of India National college (ICFAI National College), HUBLI

Nayana Phulphagar has verified this Calculator and 1500+ more calculators!

< 20 International Finance Calculators

FRA Payoff ( Long Position )

Go FRA Payoff = Notional Principal*(((Underlying Rate at Expiration-Forward Contract Rate)*(Number of Days in Underlying Rate/360))/(1+(Underlying Rate at Expiration*(Number of Days in Underlying Rate/360))))

Put-Call Parity

Go Call Option Price = Spot Price of Underlying Asset+Put Option Price-((Strike Price)/((1+(Risk-Free Rate of Return/100))^(No. of Months/12)))

Optimal Hedge Ratio

Go Optimal Hedge Ratio = (Standard Deviation of Changes in Spot Price/Standard Deviation of Changes in Futures Price)*Correlation of Changes in Spot and Futures Prices

Option Premium

Go Option Premium = ((Share Option Warrant/Number of Securities Per Option Warrant)+(Purchase Price*100/Price Security-100))

Balance of Financial Account

Go Balance of Financial Account = Net Direct Investment+Net Portfolio Investment+Asset Funding+Errors and Omissions

Annualised Forward Premium

Go Annualised Forward Premium = (((Forward Rate-Spot Rate)/Spot Rate)*(360/No. of Days))*100

Balance of Capital Account

Go Balance of Capital Account = Surpluses or Deficits of Net Non-Produced+Non-Financial Assets+Net Capital Transfers

Current Account Balance

Go Current Account Balance = Exports-Imports+Net Income Abroad+Net Current Transfers

Uncovered Interest Rate Parity

Go Expected Future Spot Rate = Current Spot Exchange Rate*((1+Domestic Interest Rate)/(1+Foreign Interest Rate))

Covered Interest Rate Parity

Go Forward Exchange Rate = (Current Spot Exchange Rate)*((1+Foreign Interest Rate)/(1+Domestic Interest Rate))

International Fisher Effect using Interest Rates

Go Change in Exchange Rate = ((Domestic Interest Rate-Foreign Interest Rate)/(1+Foreign Interest Rate))

Optimal Number of Contracts

Go Optimal Number of Contracts = (Optimal Hedge Ratio*Number of Positions Hedged)/Futures Contract Size

Relative Strength Index

Go Relative Strength Index = 100-(100/(1+(Average Gain during Up Period/Average Loss during Down Period)))

Bid Ask Spread

Go Bid Ask Spread = ((Ask Price-Bid Price)/Ask Price)*100

International Fischer Effect using Spot Rates

Go Change in Exchange Rate = (Current Spot Exchange Rate/Spot Rate in Future)-1

Vega (Options Greek)

Go Vega = Change in Option Premium/Change in Volatility of Underlying Asset

Theta

Go Theta = -Change in Option Premium/Change in Time to Maturity

Gamma

Go Gamma = Change in Delta/Change in Price of Underlying Asset

Rho (Options Greek)

Go Rho = Change in Option Premium/Change in Rate of Interest

Hedge Ratio

Go Hedge Ratio = Hedge Value/Total Position Value

Theta Formula

Theta = -Change in Option Premium/Change in Time to Maturity
θ = -ΔV/Δt

What is Theta ?

Theta, in options Greek, refers to the rate of change in an option's price concerning the passage of time. It quantifies how much an option's value decreases as time elapses, assuming all other factors remain constant. Theta is a critical concept in options trading as it highlights the impact of time decay on option prices. Options tend to lose value as they approach expiration, with theta representing this diminishing value over time. Traders and investors use theta to manage their options positions effectively, considering the erosion of an option's value due to time as a key factor in their decision-making process.

How to Calculate Theta?

Theta calculator uses Theta = -Change in Option Premium/Change in Time to Maturity to calculate the Theta, The Theta measures the rate of change in the option price in relation to the passage of time, indicating how much the option's value decreases as time passes. Theta is denoted by θ symbol.

How to calculate Theta using this online calculator? To use this online calculator for Theta, enter Change in Option Premium (ΔV) & Change in Time to Maturity (Δt) and hit the calculate button. Here is how the Theta calculation can be explained with given input values -> -5 = -2.5/0.5.

FAQ

What is Theta?

The Theta measures the rate of change in the option price in relation to the passage of time, indicating how much the option's value decreases as time passes and is represented as θ = -ΔV/Δt or Theta = -Change in Option Premium/Change in Time to Maturity. Change in Option Premium refers to the fluctuation in the price of an options contract due to alterations in factors such as the underlying asset's price, implied volatility, or interest rates & Change in Time to Maturity refers to adjustments in the remaining duration of a financial instrument, influencing its value and risk profile.

How to calculate Theta?

The Theta measures the rate of change in the option price in relation to the passage of time, indicating how much the option's value decreases as time passes is calculated using Theta = -Change in Option Premium/Change in Time to Maturity. To calculate Theta, you need Change in Option Premium (ΔV) & Change in Time to Maturity (Δt). With our tool, you need to enter the respective value for Change in Option Premium & Change in Time to Maturity and hit the calculate button. You can also select the units (if any) for Input(s) and the Output as well.

Home

FREE PDFs

🔍 Search