Select the most accurate alternative.The theta of an in-the-money cash-or-nothing call option is
A)Positive,as is the case for any call.
B)Positive,because payoffs are the same once you are in-the-money and more time to maturity only increases the possibility of moving out of the money.
C)Negative,because payoffs are the same once you are in-the-money and more time to maturity only increases the possibility of moving out of the money.
D)Negative,as is the case for any call.

Question

Quizplus · Accepted Answer

The theta of an in-the-money cash-or-nothing call option is positive because the option has a fixed payout once it is in-the-money, and more time to maturity only increases the chance of the underlying asset staying in-the-money. Therefore, the option gains value as time passes, and the theta is positive.

Select the Most Accurate Alternative