Theta
The model sensitivity of option value to the passage of time.
#Time sensitivity
Theta estimates how option value changes as time passes while other model inputs remain fixed. A short call generally has positive theta exposure because the liability loses time value in that controlled comparison.
Θ = ∂V / ∂t#Nonlinear and conditional
Time decay is not a scheduled payment. It changes with moneyness, volatility and remaining term, and it can be overwhelmed by a move in the underlying or implied volatility.