Calculator Inputs
The page is single-column overall. The calculator fields use a responsive 3-column, 2-column, and 1-column layout.
Example Data Table
| Scenario | Mode | Premium | Daily Theta | Holding Days | Acceleration | Projected Premium | Theta P/L |
|---|---|---|---|---|---|---|---|
| Long call decay check | Manual | 5.20 | -0.08 | 10 | 25% | 4.28 | -184.00 |
| Short put income view | Manual | 3.40 | -0.05 | 7 | 15% | 3.01 | +78.00 |
| Model-based estimate | Black-Scholes | Auto | Auto | 14 | 20% | Varies | Depends on side |
These rows are illustrative examples. Your output changes with premium, strike, volatility, and holding assumptions.
Formula Used
Effective Thetad = |Theta| × Calendar Multiplier × Acceleration Multiplier
Projected Premiumd = max(Floor, Premiumd-1 − Effective Thetad)
Calendar Multiplier = 1 + (Calendar Adjustment ÷ 100)
Acceleration Multiplier = 1 + (Acceleration % × Progress to Expiry)
Total Decay = Starting Premium − Final Premium
Theta P/L = Total Decay × Contracts × Contract Size × Position Direction
d1 = [ln(S/K) + (r + σ²/2)T] ÷ (σ√T)
d2 = d1 − σ√T
Call Theta = −[Sφ(d1)σ ÷ (2√T)] − rKe−rTN(d2)
Put Theta = −[Sφ(d1)σ ÷ (2√T)] + rKe−rTN(−d2)
The model isolates theta. It assumes the underlying price stays unchanged during the projection unless you rerun the scenario with new inputs.
How to Use This Calculator
- Choose manual theta if you already know the option's daily theta. Choose Black-Scholes estimate if you want the calculator to estimate price and theta.
- Enter option type, current premium, underlying price, strike, expiry, and holding period.
- Add contracts, contract size, and position side to translate premium decay into position-level dollars.
- Use accelerated decay when you want theta to intensify as expiry approaches.
- Use calendar adjustment to model weekends, holidays, or a custom decay cushion.
- Press Calculate Theta Decay to show the summary, full projection schedule, and Plotly chart above the form.
FAQs
1) What does theta mean in options trading?
Theta measures how much an option premium may lose each day, assuming other factors stay unchanged. Long options usually carry negative theta, while short options usually benefit from time decay.
2) Why can projected decay speed up near expiry?
Time value often disappears faster as expiration approaches. The accelerated model lets you simulate that effect instead of keeping daily decay perfectly flat throughout the holding period.
3) Why does the calculator use an intrinsic floor?
An option premium generally should not fall below intrinsic value if the underlying price is unchanged. That floor keeps the projection realistic for in-the-money positions.
4) Should I use manual theta or Black-Scholes mode?
Use manual mode when your broker already provides theta. Use Black-Scholes mode when you want the page to estimate premium and theta from price, strike, volatility, rate, and time.
5) Does this calculator include vega, delta, or gamma changes?
No. This model focuses on time decay. It does not reprice the option for changing volatility, underlying movement, or second-order Greek interactions during the projection window.
6) Why can short options show positive theta P/L?
Short option sellers usually gain when premium erodes, because they benefit from buying back the option cheaper or letting time value shrink while holding the position.
7) What does calendar adjustment change?
It scales the daily theta effect up or down. You can use it to reflect weekend decay, holidays, or a conservative buffer in your planning assumptions.
8) Is this calculator enough for live trading decisions?
It is best for education, planning, and scenario testing. Real option values can move differently because price, volatility, liquidity, spreads, and events all affect actual trades.