Investor A bought a call option that expires in 6 months.Investor B wrote a put option with a 9 month maturity.All else equal as the time to expiration approaches the value of Investor A's position will _______ and the value of Investor B's position will _______.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease

Question

Quizplus · Accepted Answer

As time to expiration approaches, the time value of a call option decreases, reducing its value (Investor A's position). For a written put option, the time decay benefits the writer, potentially increasing the value of Investor B's position.

Investor a Bought a Call Option That Expires in 6