How Does the Theta of a Deep ITM Option Compare to the Theta of an ATM Option? ▴ Learn

How Does the Theta of a Deep ITM Option Compare to the Theta of an ATM Option?

The Theta of a deep ITM option is significantly lower in magnitude (closer to zero) than the Theta of an ATM option. Deep ITM options have very little extrinsic value, so there is less time value to decay.

ATM options, having the maximum extrinsic value, exhibit the highest rate of time decay. The lower Theta of the deep ITM option reflects its minimal time value component.

Does Theta Decay Affect In-the-Money, At-the-Money, and Out-of-the-Money Options Equally?

How Does a Very Deep ITM Option’s Theta Compare to an ATM Option?

What Is the Relationship between Theta and the Option’s “Moneyness”?

What Is the Concept of “Extrinsic Value” and How Does It Relate to ITM Options?