In the previous video, we learned about gamma. It helps you figure out the rate of change of delta for a given change in the underlying. By now, you know that options have an expiry date, and they keep losing value as they approach the expiry. Knowing this important when you're taking a trade. So, how do you figure out the rate at which an option will lose its premium as it approaches expiry?
This is where theta comes in. theta helps you figure out the rate at which an option loses value as time passes, and it is expressed in points. Learn more about theta here: https://zerodha.com/varsity/chapter/theta/
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