Options Time Decay Paths Test

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Characteristics Of Theta Value

You might have noticed something perculiar about the theta of Out of The Money (OTM) options when comparing the two pictures above and that is, theta value for OTM options are higher with longer expiration and lower with nearer expiration.
Indeed, theta behaves differently for ITM/ATM options and OTM options:

ITM/ATM Options Theta

Further Expiration : Low Theta
Nearer EXpiration : High Theta

OTM Options Theta

Further Expiration : High Theta
Nearer EXpiration : Low Theta
As you can see from the below illustrations, ITM and ATM options decays fastest during the last 30 days to expiration whereas OTM options decays the least during the final 30 days, which is also due to the fact that OTM options near to expiration has too little premium value left to decay on anyways.