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Options · 4 min

Time decay: buyer vs seller

An option's premium depends not only on price but on time left. Every day a little of that time value melts away.

Theta (time decay)

Even if the price doesn't move, the premium slowly shrinks, fastest near expiry. That works against buyers and for sellers.

Buyer vs seller

Buyer: limited loss (the premium) but needs a quick, big enough move. Seller: earns a small premium but can face large losses and needs margin.

Volatility

More fear in the market (higher India VIX) means pricier premiums. After a big event volatility can drop, and premiums with it.

Quiz (3 questions)

  1. 1. If price doesn't move, what happens to an option buyer?

  2. 2. When is time decay fastest?

  3. 3. When India VIX is high, premiums are…

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This is for learning only, not advice on any stock or trade.