Which measure deals with the rate of time value decay of options?

The measure that deals with the rate of time value decay of options is known as Theta. Theta quantifies the impact of time on the price of an option; it represents the amount an option’s price is expected to decrease as its expiration date approaches, assuming all other factors remain constant.

As options have a finite lifespan, time decay is an important consideration for traders, particularly those holding options positions. Theta provides insight into how much value an option is likely to lose per day. This understanding is crucial for options traders, especially if they are employing strategies that involve holding positions over time, as it helps them gauge the potential deterioration of their option's extrinsic value.

In contrast, Gamma measures the rate of change of Delta, Delta represents the sensitivity of an option's price to changes in the price of the underlying asset, and Rho indicates the sensitivity of an option’s price relative to changes in interest rates. While each of these measures is important in the context of options trading, only Theta specifically addresses the phenomenon of time decay.