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How Does Implied Volatility Affect the Rate of Theta Decay?

High implied volatility increases the absolute amount of time value, resulting in a higher absolute theta (larger daily decay).
Greeks.Live23.11.25

How Does Implied Volatility Affect the Rate of Theta Decay?

Higher implied volatility (IV) increases the option's premium, meaning it has more time value to lose. Therefore, options with high IV will generally have a higher absolute theta (a larger daily decay amount) than options with low IV, all else being equal.

This means the hedge is more costly to hold.

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