An option contract in which the underlying’s market price is very near to the strike price. For example, a call option with a strike price of 100 and its underlying stock is currently trading at 101 or 99 is considered near the money. And a put option with a strike price of 50, while its underlying stock is currently trading at 49 or 51. Once the underlying price and the strike price of an option converges, the option would be at the money. Near-the-money options experience more decay and accelerated decay than in-the-money options or out-of-the-money options.

Longer-term near-the-money options experience insubstantial time decay but on the same highly accelerated rate as otherwise identical shorter-term near-the-money options.