The absolute value of theta is highest for options
A) That are deep out-of-the-money.
B) That are near-the-money.
C) That are deep in-the-money.
D) There is not enough information to determine the answer.

Question

Quizplus · Accepted Answer

Theta represents the rate of decline of an option's value with the passage of time. Options that are near-the-money have the highest time value, and thus, their value is most sensitive to the passage of time, leading to a higher absolute value of theta. Deep in-the-money or out-of-the-money options have less time value, so their theta values are lower.

The Absolute Value of Theta Is Highest for Options