How Does a Longer Time to Expiration Mitigate the Immediate Impact of Theta?
Options with a longer time to expiration have a lower Theta value. This means the premium loss per day due to time decay is smaller compared to options nearing expiration.
The decay is spread out over a longer period, making the immediate daily loss less significant and giving the option a longer runway for the underlying crypto's price to move favorably.
Glossar
Immediate Impact
Event ⎊ The immediate impact refers to the rapid price action and liquidity shifts that occur within seconds or minutes following a significant market event.
Longer Time to Expiration
Duration ⎊ Longer time to expiration in cryptocurrency options signifies a protracted period until the contract’s settlement date, influencing pricing models and risk profiles.