SPDR S&P 500 (SPY)

[Tbags7]

Theta is the time value of an option and probably the answer you’re looking for.

“What is Theta?
Alex Trebek (RIP): Yes that is Correct.

I will take Options Pricing for 500 Alex….

And that’s the daily double! How much would you like to wager?

Like the rest of retail investors, I would like to gamble my entire net worth Alex.”


In other areas of life you’re paying a premium (more) or buying at a discount (less).

But when you talk “premium,” it’s the purchase price of your option. We all know what you meant, but premium is not really the right term.

That difference is more than just time (theta) as well, there is a volatility component too (vega) so the difference between the underlying value and the price you’re paying for a contract is more than just time..and it’s not called premium.