Option Theta Decay Planner
This time decay calculator shows how an option's premium melts as expiry approaches (theta), what a weekend costs, and what a lot loses or earns each day. Runs in your browser; nothing is uploaded.
| After | Premium | Change per unit | Per lot |
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Understanding the calculation
- Premium
- The Black-Scholes price of a European option with a 5.5% risk-free rate and no dividends, rounded to Rs 0.05.
- Decay after d days
- The price with (days to expiry - d) days left, minus today's price, with the price and volatility unchanged. The amount per lot is that difference times the lot size, and a seller earns what a buyer loses.
Common questions
What is theta?
Theta is the amount an option loses in value each day just because time passes, when nothing else changes. It is the cost a buyer pays for holding an option and the income a seller collects. It speeds up as expiry gets closer, especially for options near the strike.
How does this planner work out the decay?
It uses the Black-Scholes model. It prices the option today, then prices it again after each number of days passes, keeping the price and volatility the same, and shows the difference. The price on expiry day is just its intrinsic value.
Why does the weekend cost matter?
Options lose value over calendar days in the model, so the premium you pay on Friday has to absorb two more days of decay before Monday. The weekend cost shows the drop from holding across three calendar days, although in practice the market may price weekend decay differently.
Does the price stay fixed in the model?
Yes. This planner isolates the effect of time by holding the price and implied volatility constant. In practice both move, and a favourable move in the price can outweigh the decay for a buyer.
Is decay linear?
No. At-the-money options lose value slowly at first and faster near expiry, while deep in-the-money and out-of-the-money options decay differently. The chart shows the shape for your strike.
Which risk-free rate is used?
A fixed 5.5% a year, close to the current 91-day Treasury Bill yield, which has a small effect on short-dated options. Volatility is the main driver, so use the implied volatility from your broker's option chain.