As an option nears its expiration date, the size of the premium approaches
A)zero.
B)infinity.
C)its intrinsic value.
D)an amount which varies, depending on prevailing market interest rates on the expiration date.

Question

Quizplus · Accepted Answer

As an option approaches its expiration date, the time value of the option diminishes and the premium decreases until it reaches its intrinsic value, which is the difference between the stock price and the strike price. Therefore, the size of the premium approaches its intrinsic value.

As an Option Nears Its Expiration Date, the Size of the Premium