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What is the key concept highlighted in the adage 'Time is money' in the context of options trading?

Options trading is a quick way to make money

The passage of time significantly influences option pricing

Options trading requires a substantial time investment

Timing the market is crucial for successful options trading

Qn. 2 / 7

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How does the likelihood of an option expiring 'in the money' (ITM) change as the time to expiry increases?

The likelihood of expiring ITM decreases

The likelihood of expiring ITM remains constant

The likelihood of expiring ITM increases

The likelihood of expiring ITM is unpredictable

Qn. 3 / 7

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What are the two primary components that constitute the premium paid for an option?

Strike price and spot price

Volatility and liquidity

Time value and intrinsic value

Risk premium and reward premium

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What is Theta in options trading?

The rate of change in an option's price relative to the underlying asset's price

The sensitivity of an option's price to changes in implied volatility

The rate at which an option loses value as time passes

The difference between an option's price and its intrinsic value

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How does Theta impact option buyers and option sellers differently?

Theta has a positive impact on both option buyers and sellers

Theta has a negative impact on option buyers and a positive impact on option sellers

Theta has a positive impact on option buyers and a negative impact on option sellers

Theta has a negligible impact on both option buyers and sellers

Qn. 6 / 7

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What is the relationship between time to expiry and the time value component of an option's premium?

Time value increases as time to expiry decreases

Time value remains constant regardless of time to expiry

Time value decreases as time to expiry decreases

The relationship between time value and time to expiry is unpredictable

Qn. 7 / 7

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What is the key takeaway regarding the impact of time decay on options trading?

Options are a highly stable investment due to minimal time decay

Time decay only affects options that are 'out of the money' (OTM)

All options, both calls and puts, lose value as the expiration date approaches

Time decay is irrelevant for options with high intrinsic value