How Does the "Moneyness" of a Crypto Option Affect Its Premium's Time Value? ▴ Learn

How Does the “Moneyness” of a Crypto Option Affect Its Premium’s Time Value?

Time value is the portion of an option's premium that exceeds its intrinsic value. OTM and ATM options have the highest time value because their entire premium is time value, reflecting the uncertainty and potential for the option to become ITM.

ITM options have a lower percentage of time value in their total premium. As expiration nears, time value decays for all moneyness states, a phenomenon known as theta decay.

What Is Delta and How Does It Relate to an Option Being ITM, OTM, or At-The-Money (ATM)?

How Does the Moneyness (ITM, OTM, ATM) of an Option Affect Its Bid-Offer Spread?

What Is the Difference between an ITM, OTM, and ATM Call Option?

Why Do ATM Options Have the Highest Time Value?