hy friends,
Theta means amount of money is melting when time passing right ? in this definition one doubt, time means one day or every second?
i am just detailing my question theta of options is 5 means that 5 point will melt when one day passing right? or every second some small amount will melt in option premium?
please help
Theoretically that much value will erode from Option premium per day. But, Greeks are having effect on Option prices throughout the trading hours, so the premium will erode little by little each passing moment throughout the trading day.
You can learn more on Option Greeks and their effect on Option prices on Varsity:
Hey Sarath,
Read this article written beautifully and explain all aspects of option Greeks which includes Theta