Skip to main content
Learn

Does Theta Decay Affect ITM Options Differently than OTM Options?

OTM premium decays to zero; ITM premium decays toward intrinsic value.
Greeks.Live14.11.25

Does Theta Decay Affect ITM Options Differently than OTM Options?

Yes, Theta decay affects them differently. For OTM options, Theta decay causes the entire premium to erode towards zero.

For ITM options, Theta decay causes the premium to erode towards its intrinsic value. While the absolute dollar decay may be highest for ATM/NTM options, the percentage decay is often highest for OTM options, as their value is 100% time value.

How Does the Premium Relate to the Intrinsic and Extrinsic Value of an Option?
What Happens to Extrinsic Value at Expiration?
How Does a Shorter Time to Expiration Affect the Premium Difference between ITM and OTM Options?
Why Does an ITM Option Have a Higher Premium Compared to an OTM Option with the Same Expiration?

About

Contact

Editorial Policy

Terms of Service

Privacy Policy

Cookie Policy

© 2025 Greeks.Live

All Rights Reserved

Greeks.Live RFQ

Build by Noo on Engine

Source: The content on this website is produced by Greeks.live's proprietary analysis systems, which utilize advanced Large Language Models (LLMs). This information might not be subject to a full human review before publication and may contain errors.
Responsibility: You should not make any financial decisions based solely on the content presented here. We strongly urge you to conduct your own rigorous due diligence and to consult a qualified, independent financial advisor.
Purpose: All information is intended for informational purposes only. It should not be construed as financial, investment, trading, or any other form of professional advice. News and data are not trading signals.
Risk: The cryptocurrency, derivatives, and options markets are highly volatile and carry significant risk. By using this site, you acknowledge these risks and agree that Greeks.live and its affiliates are not responsible for any financial losses you may incur.