# Premium Decay — StockMojo

> Theta decay visualization for options

- Live page: https://stockmojo.in/premium-decay
- Content last updated: 2026-04-11
- Platform: StockMojo — free options analytics for Indian markets (NSE F&O)

This is a machine-readable markdown mirror of the live tool page. The live page shows real-time NSE data during market hours (09:15-15:30 IST) and supports 200+ F&O symbols via per-symbol URLs like https://stockmojo.in/premium-decay/banknifty.

## Frequently asked questions

### What is premium decay (theta) in options?

Premium decay, technically called theta, is the rate at which an option loses extrinsic value purely due to the passage of time. Even if the underlying price stays exactly the same and IV stays exactly the same, an option is worth less tomorrow than it is today. Theta is the dollar amount it loses per day.

### How fast does premium decay on expiry day?

On expiry day, premium decay is at its most extreme. ATM options can lose 40-60% of their value in the first half of the session and another 30% in the final hour. By close, all out-of-the-money options have decayed to zero. This is why expiry-day option selling is popular — and why it's also high-risk if the underlying moves sharply.

### Why is premium decay non-linear?

Theta accelerates as expiry approaches because the time-value component shrinks faster as it gets closer to zero. An option with 30 days to expiry loses very little per day; the same option with 3 days to expiry loses several times more per day; with 3 hours to expiry, it loses several times more per hour. The decay curve looks like an exponential, not a straight line.

### How does premium decay differ for ATM, ITM, and OTM options?

ATM options have the most extrinsic value and therefore the most absolute decay. ITM options have less extrinsic value (most of their price is intrinsic) and decay more slowly in absolute terms. Deep OTM options have very little extrinsic value to lose and decay slowly until they collapse to zero in the final hours.

### How can option sellers profit from premium decay?

Option sellers collect the premium upfront and benefit from theta every day the position is open. The longer they hold (and the closer to expiry they sell), the more decay they capture. Common premium-selling strategies — short straddles, short strangles, iron condors, credit spreads — all monetize the decay this chart visualizes.

### Why does IV affect premium decay rate?

Higher IV means more extrinsic value in the option, which means more value to decay away. A high-IV option will decay more in absolute rupees per day than a low-IV option with the same time to expiry — even though theta as a percentage of premium might be similar. This is why premium sellers prefer high-IV environments.

### What's the best time of day to enter a short premium trade?

Many practitioners enter short premium positions at the open of the trading day to capture maximum decay across the session. On expiry day, the open carries the most theta available. The trade-off is gamma risk — short-dated, ATM options can move violently against you in minutes if the underlying breaks out.

### How does the StockMojo premium decay chart visualize theta?

The chart plots option premium over time for selected strikes and expiries, making the decay curve visible directly. You can see the slope steepen as expiry approaches and compare decay across strikes. Combined with the live IV reading, it gives you a quantitative view of where the easy decay is and where gamma risk is the highest.

## How to use the Premium Decay tool

1. **Pick a symbol, strike, and expiry** — Choose your underlying, the strike you want to analyze, and the expiry. Most traders watch ATM ± 1 strike.
2. **Read the decay curve** — Note the current premium and how it has decayed since the start of the session or since the option was first listed.
3. **Compare ATM vs OTM strikes** — Switch between strikes to see how decay differs across the moneyness range. ATM decay is fastest in absolute terms.
4. **Plan your entry around theta** — Use the steepest part of the decay curve as a guide for when to enter short-premium positions and when to exit.
5. **Cross-reference with the Straddle Chart** — Open the Straddle Chart alongside Premium Decay for a combined view of single-leg theta and combined-leg expected move.

## Related tools

- [Straddle Chart](https://stockmojo.in/straddle-chart) — markdown: https://stockmojo.in/straddle-chart.md
- [IV Chart](https://stockmojo.in/iv-chart) — markdown: https://stockmojo.in/iv-chart.md
- [Option Chain](https://stockmojo.in/option-chain) — markdown: https://stockmojo.in/option-chain.md

## Glossary

Terms used: theta, premium-decay, implied-volatility, strike-price. Definitions: https://stockmojo.in/glossary