For options that are at-the-money, which of the following statements is typically valid as maturity nears?
A) Gamma increases as does theta.
B) Gamma increases and theta decreases.
C) Gamma decreases and theta increases.
D) Gamma and theta both decrease.

Question

Quizplus · Accepted Answer

For at-the-money options, as maturity nears, gamma (the rate of change of delta with respect to the price of the underlying asset) typically increases because the option's delta is more sensitive near expiration. Theta (time decay) decreases because there's less time value left to decay.

For Options That Are At-The-Money, Which of the Following Statements