How Does Time Decay Affect an In-the-Money Call Option?

Time decay, measured by theta, negatively affects the time value component of an in-the-money (ITM) call option's premium. As the expiration date approaches, the option's time value erodes.

While the intrinsic value of an ITM option remains, the overall premium decreases due to the loss of time value. This decay is less pronounced for deep ITM options but is a constant factor that reduces the option's total value over time.