An in the money American call option increases in value as expiration approaches,but an out of the money American call option decreases in value as expiration approaches.

Question

Quizplus · Accepted Answer

The value of an American call option, whether in the money or out of the money, does not solely depend on the approach of expiration. Factors such as the underlying asset's price, volatility, and interest rates also significantly affect the option's value. Time decay (theta) generally causes options to lose value as expiration approaches, but this effect can be offset by changes in other factors.

An in the Money American Call Option Increases in Value