Does an ITM Option Lose Time Value Faster or Slower than an OTM Option, All Else Equal? ⎊ Path

Does an ITM Option Lose Time Value Faster or Slower than an OTM Option, All Else Equal?

Generally, ATM and near-the-money options experience the fastest time value decay (highest Theta) in absolute dollar terms, especially as expiration nears. However, OTM options, while having a lower absolute theta, lose a greater percentage of their value because their entire premium is time value.

Deep ITM options typically have the slowest time decay because their value is dominated by intrinsic value.

How Does the Rate of Time Decay Affect the Risk Profile of a Covered Call Strategy?

Does Theta Affect In-the-Money, At-the-Money, and Out-of-the-Money Options Equally?

Does Theta Decay Faster for a Call or a Put Option, All Else Being Equal?

At What Point in an Option’s Life Is Theta Decay Typically the Fastest?

What Is Delta and How Does It Relate to an Option Being ITM, OTM, or At-The-Money (ATM)?

How Does the Concept of “Moneyness” Relate to OTM, ATM, and ITM?

How Does the Theta of a Deep ITM Option Compare to the Theta of an ATM Option?

Why Is the Time Decay (Theta) Generally Highest for OTM Options?

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