American call and put option values increase as time to expiration increases, all else constant.

Question

Quizplus · Accepted Answer

This is one of the basic principles of option pricing. As time to expiration increases, there is a greater chance that the underlying asset price will move in the desired direction, which increases the probability of the option being exercised. This increased probability of exercise increases the option value, all else constant.

American Call and Put Option Values Increase as Time to Expiration