How Does a Shorter Time to Expiration Affect the Premium Difference between ITM and OTM Options?

As time to expiration shortens, the time value for both ITM and OTM options decreases (Theta decay). For OTM options, their premium shrinks entirely to zero.

For ITM options, their premium shrinks toward their intrinsic value. The absolute premium difference will narrow because the time value component, which is the variable part, is decaying for both.