Theta Decay

Theta decay is the gradual loss of value in an options contract as its expiration date approaches, even if the stock price stays the same. You'll encounter this when trading options—contracts that give you the right to buy or sell a stock at a set price by a certain date. It matters because time works against option buyers: the closer you get to expiration, the less time value your contract has, so you can lose money just from waiting. Think of it like a coupon expiring—a 30-day coupon is worth more than a 1-day coupon, even if nothing else changes. Options sellers actually benefit from theta decay, which is why they collect premiums upfront.