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How Does Theta Affect an OTM Option Differently than an ITM Option?

OTM options are composed only of time value, making their premium more sensitive to Theta.
Greeks.Live22.11.25

How Does Theta Affect an OTM Option Differently than an ITM Option?

Theta causes both OTM and ITM options to lose time value, but OTM options are composed entirely of time value, so Theta's impact on their price is often more pronounced as a percentage of their total premium. ITM options have a stable intrinsic value component that cushions the decay.

Can an OTM Option Ever Have a Higher Time Value than an ITM Option?
How Does Time to Expiration Affect an Option’s Vega?
How Does ‘Time Decay’ (Theta) Affect the Value of an ITM Option Compared to an OTM Option?
Does Theta Affect In-the-Money, At-the-Money, and Out-of-the-Money Options Equally?

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