Theta
Theta is the sensitivity of option value to the passing of time — the daily rent of holding convexity.
Definition
Theta refers to the daily rent of holding convexity. Keep that definition fixed when comparing series, managers, or regimes — renaming the same tape does not create a new signal.
Why it matters
Options and futures embed views on vol, skew, and path that cash markets only hint at. When the daily rent of holding convexity shifts, related hedges, limits, and narratives usually need an explicit update rather than a quiet assumption.
Case
Suppose a desk is positioned for the opposite of what theta is saying. If the daily rent of holding convexity moves against that book, the first question is not “is the story clever?” but whether size, hedges, and stop logic still match the observation.
How to read it
State the expiry and Greek exposure; unmarked vol or pinning effects rewrite the thesis. Prefer a short written null hypothesis for Theta: what would falsify the current reading in the next window?
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