What is options theta (time decay)?

Theta measures how much an option's value declines each day as it approaches expiration, all else equal. A theta of -0.05 means the option loses $5 per day (per contract of 100 shares). This decay accelerates in the last 30 days before expiration. Theta works against option buyers (their contract loses value over time) and in favor of option sellers (who collect that decaying value as profit).