Time decay (Theta) is the gradual reduction in an option’s value as it approaches expiry. Every passing day reduces the time value, even if the market doesn’t move.
Why option buyers lose money:
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Time decay accelerates near expiry
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Sideways markets erode premiums
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Correct direction but late movement still causes loss
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Low volatility reduces option value
Key insight:
Option buyers must be right on direction, timing, and volatility—otherwise, time works against them.