Which of the following would tend to decrease the size of the time value of the option?
A) The price volatility of the underlying asset is high.
B) The time to expiration of the contract is far away.
C) The underlying price of the asset approaches the strike price.
D) The time to expiration of the options contract is near.

Question

Quizplus · Accepted Answer

The time value of an option decreases as the time to expiration of the option contract nears. This is because there is less time for the underlying asset's price to move in a favorable direction, reducing the probability of the option being in the money at expiration.

Which of the Following Would Tend to Decrease the Size