Option premiums deteriorate at a/an ________ as they approach expiration.
A) increasing rate
B) proportional
C) decreasing rate
D) less than proportional rate

Question

Quizplus · Accepted Answer

Option premiums deteriorate at an increasing rate as they approach expiration, a phenomenon known as time decay or theta. This is because the probability of the option finishing in the money decreases as the expiration date gets closer, especially for out-of-the-money options.

Option Premiums Deteriorate at A/an ________ as They Approach Expiration