Chapter 03 · Section 3.1
Diminishing Time Value-2
This graph suggests that time value diminishes more rapidly towards expiration.
Is that close to reality? Please answer with yes or no.
a) no
b) yes
If expiration is 90 days away, the value of an option does not decrease a lot during one day if there is no other significant change. However, if expiration is only three days a way, one day can be expensive.