what happens when two options are similar and one expires after a longer period the value of the longer term option is higher since there is more time during which the option could move above the strike price 
theta is generally expressed as a negative number for long positions the option s value diminishes as time passes until the zero time value when the option expires this is why theta is good for sellers and not so for buyers value decreases from the buyer s side as time goes by and increases for the seller hence selling an option is known as a positive theta trade as theta increases so do sellers earnings on their options time decay and option valuesif all else remains the same the time decay causes an option to lose extrinsic value or premium as it approaches its expiration date therefore theta is one of the main greeks that option buyers should pay attention to given that time is not on their side if they are long option holders conversely time is on the side of the investor who writes options option writers benefit from time decay because options become less valuable as the time to expiration decreases consequently it is cheaper for option writers to buy back the options and close out the short position put differently option values are if applicable composed of extrinsic and intrinsic values at option expiration all that remains is the intrinsic value if any because time is a significant part of the extrinsic value theta vs other greeksthe greeks measure the sensitivity of options prices to their respective variables for instance the delta of an option indicates the sensitivity of an option s price in relation to a 1 change in the underlying asset while the gamma indicates the sensitivity of an option s delta with regard to a 1 change in the underlying security vega indicates how an option s price theoretically changes for each one percentage point move in implied volatility drawn from the greek alphabet theta has numerous meanings across different fields in economics it also refers to the reserve ratio of banks in economic models example of thetaimagine you re interested in buying a call option for a stock named techco the stock is trading at 50 and you re looking at a call option with a 52 strike price expiring in 30 days this option costs 2 per share or 200 for a standard options contract that covers 100 shares suppose the theta for this option is 0 05 if everything else stock price volatility interest rates etc stays the same the option will lose five cents per day in value just because time is passing fast forward 10 days and you find that techco s stock price hasn t changed if all else stayed the same the value of your option should have decreased only because of theta or time decay specifically you d expect a drop of 50 cents 10 days multiplied by the theta 0 05 in the option s price that would mean your 2 option is now worth 1 50 hence understanding theta helps you grasp how the ticking of the clock affects your options investments time decay gradually erodes an option s value as the expiration date approaches knowing this can help you make more informed decisions for your trading strategy 