Theta is a measure of option's rate of decline trough its life cycle due to passage of time. By being closer to its maturity, the option will lose value each day trough time, if stock price and volatility are constant. Theta is the value of that collapse in price and shows how much of option's value is attenuated.
Long calls and puts will always have negative theta, while short calls and puts will always have positive theta. The fewer days unttil option's expiration, the higher the theta. Theta value of 1 means that option will lose $1 of its value each day.
Theta is also called time decay.
