Chapter 03 · Section 3.1
Diminishing Time Value-1
This graph suggests that time value diminishes less strongly towards expiration.
Is that close to reality? Please answer with yes or no.
a) no
b) yes
If you hold an option that expires in 5 days, after 3 days you will have "consumed" 60% of the time it is valid.
However, if you hold an option that expires in 20 days, after 3 days you will have consumed only 15% of the time it is valid.