Theta Calculator

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✖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]

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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)

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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 100+ more calculators!

Verified by Nayana Phulphagar

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

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< International Finance Calculators

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Theta Formula

LaTeX Go

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.

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