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Theta and At the Money

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Seneca60BC

Joined
14 October 2006
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Hi all

Can someone explain to me why theta is greatest for warrants that are trading AT the money? For some reason I cannot grasp this concept.

Thanks!
 
Seneca60BC said:
Hi all

Can someone explain to me why theta is greatest for warrants that are trading AT the money? For some reason I cannot grasp this concept.

Thanks!
Click to expand...

Basically, it's because extrinsic value (time value) is greatest ATM, ergo, more value that must decay per day to get to zero at expiry.
 
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