The gamma of a cash-or-nothing binary call option and the theta of such an option
A) is always positive; is always negative.
B) is always positive; can be positive or negative.
C) can be positive or negative; is always negative.
D) can be positive or negative; can be positive or negative.

Question

Quizplus · Accepted Answer

The gamma of a cash-or-nothing binary call option is always positive because the option's delta increases as the underlying asset price increases. The theta of a cash-or-nothing binary call option can be positive or negative, depending on the time to expiration and the volatility of the underlying asset.

The Gamma of a Cash-Or-Nothing Binary Call Option and the Theta