Does Theta Affect In-the-Money, At-the-Money, and Out-of-the-Money Options Equally?
No, Theta does not affect all options equally. At-the-money (ATM) options typically have the highest absolute Theta because they consist entirely of time value, which is most susceptible to decay.
Deep in-the-money (ITM) and deep out-of-the-money (OTM) options have lower absolute Theta. This is because ITM options are mostly intrinsic value (not subject to decay), and OTM options have very little time value left to decay.
