What Are the Risks Associated with Trading Deep-in-the-Money Options?

While DITM options behave similarly to the underlying asset, they carry unique risks. The primary risk is illiquidity; DITM options often have lower trading volume and wider bid-ask spreads, making them harder to buy and sell at a fair price.

They still possess time value, which will decay to zero by expiration, creating a small but certain loss if the underlying asset's price remains static. Finally, although they require less capital than owning the asset, they still represent a significant investment that can be lost if the asset's price moves sharply against the position.