Learn about the option Greek theta and credit spreads, why credit spreads have positive thetas, and what positive thetas signify in credit spreads.

But first, a little about Options greeks. Theta options are defined as an options greek that measures the rate at which the option loses its time value as the expiration date draws near.

Instead of P moving anticlockwise from (1, 0), if it goes clockwise then \(\theta\) will be negative! No matter where P is on the circle, the \(x\)-coordinate gives the value of \(\cos{\theta}\) ...

This circle has the centre at the origin and a radius of 1 unit. The point P can move around the circumference of the circle. At point P the \(x\)-coordinate is \(\cos{\theta}\) and the \(y ...