Slapshot,
Rather than thinking of theta with respect to delta, its probably better to stick to thinking of theta with respect to the underlying and strike.
As riskarb pointed out, all of the greeks with the exception of delta are at their highest when ATM. So for theta, this means that options that are ATM decay faster than options that are either OTM or ITM. If the strikes are on an X axis and you plotted the value of the theta on the Y axis for each strike, then you would get a graph that roughly looked like a bell curve where the peak of the curve would be ATM.
This gets amplified somewhat the closer to expiration one gets. Again, sticking with theta, the curve plotted earlier becomes taller and narrower - exhibiting kurtosis. In simple terms, this means that theta and by definition the decay for options ATM increases much more than options OTM and ITM as expiration approaches. Longer term options waste away slowly. Shorter term options waste away quickly. Theta increase as time passes.
If today you bought an ATM option and an ITM option and then next week, if all else remained the same e.g. underlying, volatility etc. then the ATM option would have lost more value than the ITM option due to the higher theta.
Try www.ivolatility.com [EDIT] Sorry, only has delta and IV.
To re-iterate what others have suggested: "Option Volatility and Pricing" is a comprehensive, if dated, book well worth reading a few times to really get you up to speed on most of these issues and more. It is often considered a little difficult to read (writing style) but all things worthwhile take a little effort.
McMillan's books are easier to read IMO and covers things from a different perspective. "Options as Strategic Investment" is supremely popular though I have not read it. I have read "McMillan on Options" which does not cover the introductory material you are probably after.
Good luck!
MoMoney.
Rather than thinking of theta with respect to delta, its probably better to stick to thinking of theta with respect to the underlying and strike.
As riskarb pointed out, all of the greeks with the exception of delta are at their highest when ATM. So for theta, this means that options that are ATM decay faster than options that are either OTM or ITM. If the strikes are on an X axis and you plotted the value of the theta on the Y axis for each strike, then you would get a graph that roughly looked like a bell curve where the peak of the curve would be ATM.
This gets amplified somewhat the closer to expiration one gets. Again, sticking with theta, the curve plotted earlier becomes taller and narrower - exhibiting kurtosis. In simple terms, this means that theta and by definition the decay for options ATM increases much more than options OTM and ITM as expiration approaches. Longer term options waste away slowly. Shorter term options waste away quickly. Theta increase as time passes.
If today you bought an ATM option and an ITM option and then next week, if all else remained the same e.g. underlying, volatility etc. then the ATM option would have lost more value than the ITM option due to the higher theta.
Try www.ivolatility.com [EDIT] Sorry, only has delta and IV.
To re-iterate what others have suggested: "Option Volatility and Pricing" is a comprehensive, if dated, book well worth reading a few times to really get you up to speed on most of these issues and more. It is often considered a little difficult to read (writing style) but all things worthwhile take a little effort.
McMillan's books are easier to read IMO and covers things from a different perspective. "Options as Strategic Investment" is supremely popular though I have not read it. I have read "McMillan on Options" which does not cover the introductory material you are probably after.
Good luck!
MoMoney.