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Theta Formula

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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. Check FAQs

θ = - \frac{ΔV}{Δt}

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

Theta Example

With values

With units

Only example

Here is how the Theta equation looks like with Values.

Here is how the Theta equation looks like with Units.

Here is how the Theta equation looks like.

-5 = - \frac{2.5}{0.5}

-5 = - \frac{2.5}{0.5}

-5 = - \frac{2.5}{0.5}

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Theta Solution

Follow our step by step solution on how to calculate Theta?

FIRST Step Consider the formula

θ = - \frac{ΔV}{Δt}

Next Step Substitute values of Variables

∴

θ = - \frac{2.5}{0.5}

Next Step Prepare to Evaluate

∴

θ = - \frac{2.5}{0.5}

LAST Step Evaluate

∴

θ = -5

Theta Formula Elements

Variables

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.

Symbol: θ

Measurement: NAUnit: Unitless

Note: Value can be positive or negative.

Formulas to find Theta

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.

Symbol: ΔV

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Change in Option Premium

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.

Symbol: Δt

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Change in Time to Maturity

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How to Evaluate Theta?

Theta evaluator uses Theta = -Change in Option Premium/Change in Time to Maturity to evaluate 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 evaluate Theta using this online evaluator? To use this online evaluator for Theta, enter Change in Option Premium (ΔV) & Change in Time to Maturity (Δt) and hit the calculate button.

FAQs on Theta

What is the formula to find Theta?

The formula of Theta is expressed as Theta = -Change in Option Premium/Change in Time to Maturity. Here is an example- -5 = -2.5/0.5.

How to calculate Theta?

With Change in Option Premium (ΔV) & Change in Time to Maturity (Δt) we can find Theta using the formula - Theta = -Change in Option Premium/Change in Time to Maturity.

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Theta Formula

Theta Example

Theta Solution

Theta Formula Elements

Other formulas in International Finance category

How to Evaluate Theta?

FAQs on Theta

Variable Name