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Theta

The change in an option's value that an investor can expect from the passage of one day, assuming nothing else changes.

Theta can be calculated in two ways, as the dollar change of the option that an investor can expect for a one-day passage of time, all else remaining equal, or as a percentage change in the option price for a one-day passage of time, all else remaining equal.

For example, if an option trades at $1 on Monday morning and it has a theta of -$0.10 per day, you can expect the option to trade at $0.90 on Tuesday morning. Another way of measuring theta for that option is ($0.90 - $1)/$1 or -10% per day.

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