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.

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