The shorter the time to the expiration date for a currency, the ____ will be the premium of a call option, and the ____ will be the premium of a put option, other things being equal.
A) greater; greater
B) greater; lower
C) lower; lower
D) lower; greater

Question

​The shorter the time to the expiration date for a currency, the ____ will be the premium of a call option, and the ____ will be the premium of a put option, other things being equal.
A) ​greater; greater
B) ​greater; lower
C) ​lower; lower
D) ​lower; greater

Quizplus · Accepted Answer

The premium of both call and put options decreases as the expiration date approaches, assuming all other factors remain constant. This is because there is less time for the underlying asset to move in a favorable direction, reducing the value of having the option.

​The Shorter the Time to the Expiration Date for a Currency

The Shorter the Time to the Expiration Date for a Currency