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

Theta, or time decay, is generally highest for at-the-money (ATM) options and decreases as the option moves deeper in-the-money (ITM) or out-of-the-money (OTM). ATM options have the most extrinsic value to lose.

Deep ITM options have mostly intrinsic value, which is not affected by Theta, while deep OTM options have very little extrinsic value left to decay.