Theta Decay Calculator

What Is an Option's Theta?

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 the theoretical price of your option at a fixed stock price over time. The steeper the curve, the faster the option loses 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 has passed before it reaches 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 before hitting their half-life, 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 the time of 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. As an option becomes deeper ITM, more of its price becomes intrinsic value, meaning less extrinsic value is exposed to time decay.

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 the 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 entry to expiration.
3. Hover over the chart to see exact values at each DTE.
4. Compare ATM, OTM, and ITM by varying the strike—notice how the 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 because they are in the center of the stock's expected move cone. Deep ITM/OTM options will lose most of their extrinsic value before expiration, slowing their decay as they approach 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 a lower reward-to-risk ratio. Ultimately, theta is the cost of asymmetric return potential.