Ok, this is my logic (which is obviously wrong)…if you’re in the money…and your option is almost about to expire…why wouldn’t the call option value/price increase? To me it just seems that since it’s in the money…the probability of you cashing out and making $ almost reaches certainty the closer you get to expiration…thus its worth more. But the answer is price of the option DECREASES. Explain please, thanks!
Theta
time value. further out you are from expiration, more a stock could go one way or the other, more time value still there. closer to expiration, adios time value and trades closer and closer to intrinsic value. not bad for being DRUNK all weekend, eh?
TIme is worth something. If time is going away, so is value. It’s called time decay.
^ ooh, nibs beat me out and used greeks. nice!
Unless its way way way in the money (how much so I have no idea).
banni did you get over those hangovers?
Theta…ok so less time = less chance of it being volatile…if little volatility…then value of option decreases. But this is in the $…wouldn’t you want it to not be volatile…you don’t want prices to go down. You just want prices to stay put where they are. I dunno why i’m always stuck on this. Fine, theta.
It was so hard not to drink this weekend. I have this alcoholism all pent up. I will punch any man, woman, or child in the face if I hear a comment about me drinking too much this weekend.
i took the BSAS part 2 saturday hurting pretty badly and scored a 78. this has been my best score to date. i might go and close a bar out friday… it seems to work for me? ok kidding, but yeah, i am de-stressed and ready to put in a solid week (after work) this week and crush this test. it’s go time. i plan to bring my A game.
Niblita, the question said the call option was in the money…thta is why i thought the option value would increase as time decreases. That’s why im confused.
Loss of time = loss of the chance that someday it could really be WAAAAAAY in the money. The loss of that hope costs something. Does that help?
Ok i completely get it now, hahah. I guess i’m not that greedy. Once in the money, i just like to cash out. I’ll just think less time = you lose chance of even more volatility…so option value is worth less. Thanks.