Tick Tock, Time's Passing
Quantitative Finance
Level
2
Ceteris paribus, what happens to option prices as time passes?
Depends on ITM / ATM / OTM
Decreases
Increases
Depends on current volatility
Stays constant
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1 solution
The time value of an option decreases as it gets closer to expiry, hence the option price decreases as time passes.
Being long options will cost you theta over time.