Theta Decay Curve Calculator

Theta measures how much an option's price decreases each day, all else being equal. This calculator visualizes that decay curve—showing exactly how an option loses value as expiration approaches.

How to Read the Theta Decay Chart

The curve shows your option's theoretical price at a fixed stock price over time. The steeper the curve, the faster the option is losing value to time decay. Notice how the curve decelerates for deep ITM/OTM options and plummets for ATM options nearing expiration.

Key Metrics

• Entry Price: The option's theoretical value at your starting DTE. This is your baseline for measuring decay.
• Expiration Value: What the option is worth at expiration—its intrinsic value. OTM options expire worthless; ITM options retain their intrinsic value.
• Extrinsic Half-Life: The DTE at which half your extrinsic value has decayed. The % elapsed shows how much of the option's life passes before hitting the half-life. For example, 25% elapsed means the option lost half its extrinsic in only 25% of the time to expiration—a sign of early, front-loaded decay typical of OTM options. ATM options often show 70%+ elapsed, meaning they hold value longer before rapid late-stage decay.
• Initial Theta: The daily decay rate at entry. Note that theta changes over time—hover along the curve to see how it evolves.

Intrinsic vs Extrinsic Value

• Intrinsic value: The option's value if exercised today. For calls: stock price − strike (if positive). For puts: strike − stock price (if positive). Example: A 100-strike call with the stock at $110 has $10 of intrinsic value—you can buy shares $10 below market price.
• Extrinsic value: Everything above intrinsic value—also called time value. This is what theta destroys.

The shaded area between the curve and the intrinsic value line represents your extrinsic value. It will always shrink to zero by expiration.

Decay by Moneyness

• ATM options experience accelerating decay as expiration approaches.
• OTM options decay steadily at first, then slow near expiration—by then, there's little value left to lose.
• ITM options are partially sheltered from decay because only extrinsic value erodes. The deeper ITM, the more of the option's price is intrinsic value, and the less theta can take.

Why Theta Curves Aren't Linear

Think of implied volatility as defining an expected move cone around the current stock price. As expiration approaches, that cone narrows. ATM strikes stay within the cone the longest—they're at the front lines, pricing in stock price movements until the very end. That's why ATM options hold onto extrinsic value longer and then decay rapidly near expiration.

OTM and deep ITM strikes fall outside the expected move range earlier. Once a strike is far outside the cone, the market stops pricing in much probability of it mattering—so extrinsic value bleeds out sooner and the decay curve flattens.

Implied volatility shifts these dynamics. Higher IV widens the expected move cone, keeping more strikes "in play" longer—which steepens their decay curves. Lower IV narrows the cone, causing OTM/ITM decay curves to flatten out earlier at the same strikes. Try adjusting IV and the strike price above to see this in action.

For a deeper dive on this concept, see Why Theta Decay Isn't Linear.

Using This Calculator

1. Enter your option details (type, strike, stock price, IV, DTE)
2. See how the option price decays from today to expiration
3. Hover over the chart to see exact values at each DTE
4. Compare ATM vs OTM vs ITM by changing the strike—notice how decay profiles differ

Frequently Asked Questions

Is theta decay linear?

No—and that's the whole point of this calculator. ATM options decay slowly at first, then plummet near expiration. Deep ITM/OTM options decay more steadily, then flatten as their extrinsic value bottoms out. The curve shape depends on moneyness and IV—crank up IV and watch an OTM option's decay curve steepen.

Is theta decay continuous?

Theta erodes continuously in theory. You won't watch your option tick down by the second—but you'll feel it over days and weeks, as the curves above show. Though 0 DTE traders really do feel it by the hour.

How much does an option lose to theta per day?

Theta tells you directly—an option with theta of -$0.05 loses about $5 per contract per day, all else equal. But theta itself changes daily depending on the option's moneyness, time to expiration, and implied volatility. Hover along the decay curve above to see how theta evolves for any option.

When is theta decay highest?

ATM options in the final days before expiration (especially with high IV). They hold onto extrinsic value the longest due to being in the center of the stock's expected move cone. Deep ITM/OTM options will lose most of their extrinsic value before expiration, leading to a slowing of their decay as they near expiration.

Can you avoid theta decay when buying options?

You can't eliminate it for long options, but you can manage it: buy longer-dated options (slower decay), go deeper ITM (less extrinsic to lose), or use a debit spread where the short leg offsets the long leg's decay. You can even structure debit spreads with positive theta—though that typically means accepting lower reward relative to risk. Ultimately, theta is the cost of asymmetric return potential.

Related Tools

Use our other calculators to explore different aspects of options pricing and strategy:

• Long Call Calculator — Visualize P/L across stock prices at entry and expiration
• Long Put Calculator — Visualize P/L across stock prices at entry and expiration
• Options Pricing Calculator — Calculate theoretical prices and Greeks with Black-Scholes or Binomial pricing models