The graph of the typical time decay pattern of an option is shaped:
A) as a convex curve rising from left to right.
B) as a flat line above zero which then drops away to the right.
C) as a flat line below zero which then begins to rise to the right.
D) as a concave curve falling from left to right.

Question

Quizplus · Accepted Answer

The time decay of an option, also known as theta, typically shows a concave curve falling from left to right, indicating that the option loses value as it approaches expiration.

The Graph of the Typical Time Decay Pattern of an Option