Can High Implied Volatility Mitigate the Effect of High Theta?
High Implied Volatility (IV) does not mitigate the rate of Theta decay, but it inflates the starting value of the extrinsic premium. This larger initial premium gives the option buyer more buffer against the daily Theta loss.
However, if IV suddenly drops, the loss from Vega can compound the loss from Theta, creating a double negative impact on the option's price.
