The Call Theta (represented by Greek letter ‘θ’), which is often used together with various binary options trading indicators, measures the change in the value of call options in relation to the expiry time – a positive increase in value and a negative decrease in value.
Call Theta in a nutshell:
- Call theta measures the changes in the value of call options depending on the expiry time and shows positive or negative trends.
- Negative Theta for Losses: Out-of-the-money calls always have negative theta, signaling decreasing value.
- Positive Theta for Gains: In-the-money calls exhibit positive theta, reflecting rising value with time.
When is the theta of binary options positive and when is it negative?
When binary call options are out of the money, the theta of binary call options is always negative. Theta for binary call options is positive when binary call options are in-the-money.
The reason for that is simple. As time decreases, the chance of the out-of-the-money option becoming in-the-money and thus a winner becomes less. Conversely, the in-the-money option has less time to become out-of-the-money.
Exclusive Trading Course
Get 70% Off
