I am trying to hand-price options under the Black-Scholes model.
Given the following parameters:
- Stock price: $12.53$
- Strike price: $14.00$
- Risk-free rate: $0.03$
- Annualized Volatility: $0.10$
- Time until expiry in years = $.238095$
The put will have a positive theta of $0.354295$. It has a very high probability of ending up ITM (using delta as an approximation, $\Delta = -0.982251$).
What is the intuition behind this behavior? I thought for long options theta is always negative as a long option loses it's extrinsic value over time. I could see a short option having a positive theta, but a long option? This behavior seems unintuitive.