Does the Underlying Asset's Volatility Affect the Calculation of Theta? ⎊ Path

Does the Underlying Asset’s Volatility Affect the Calculation of Theta?

Yes, the underlying asset's volatility (specifically implied volatility) affects the calculation of Theta. Higher implied volatility results in a higher initial time value, but the Theta value itself (the rate of decay) is also influenced by IV, time to expiration, and moneyness.

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