Theta (the Greek letter *Θ*) is a measure of the rate of change of the value of a derivative or portfolio with time. Mathematically:

Θ= (∂P)/(∂t)

where *P* is the price of a security and

*t* is time.

The price of most options tends to decay with time. This is because option value increases with time till expiry. So, as time passes, both option value and theta decline.