Theta and At the Money

[Seneca60BC]

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!

 

[wayneL]

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!

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.