The time premium paid for an option tends to reduce the option's potential leverage.

Name: The time premium paid for an option tends to reduce the option's potential leverage.
Brand: Quizplus
Rating: 4.8 (39 reviews)

Question

Quizplus · Accepted Answer

Time premium is the amount paid for the time remaining until the expiration of an option. As the expiration date approaches, the time premium reduces, which also reduces the potential leverage of the option. This is because the option becomes less valuable as it approaches its expiration, which ultimately affects its leverage.

The Time Premium Paid for an Option Tends to Reduce