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

Theta (time decay) is generally highest for at-the-money (ATM) options. ATM options have the most time value, and thus the greatest amount to lose as expiration approaches.

Deep in-the-money and deep out-of-the-money options have lower theta because their premium is mostly intrinsic value (ITM) or already near zero (OTM), leaving less time value to decay.