Weekly expiry compresses time. Theta, the time decay of premium, is gentle on days one to three, then accelerates exponentially in the final 48 hours. A Nifty ATM option can lose 30 to 40 percent of premium to Theta alone on the final day.
Implication: buyers must be right fast; sellers collect decaying premium. The AI feature theta_decay_rate equals premium lost per day divided by total premium, computed daily. Near expiry, high Theta with low Gamma edge favours defined-risk spreads over naked buys.
Q: What is Theta in options?
A: The daily erosion of option premium due to time passing.
Q: Why does Theta accelerate near expiry?
A: Time value collapses fastest in the final 48 hours, especially for ATM options.
Q: Should I sell options every expiry?
A: Selling collects Theta but carries crash risk; the model sells only in defined-risk structures and safe regimes.
Q: How does the model use Theta?
A: As a sizing input: high Theta with low conviction reduces position size.
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By Shakti Tiwari · Options AI research pillar. NISM XII certified. Educational only, not investment advice; verify before acting.