Explanation:
Statement I is incorrect: Both call and put options' rho values approach zero as expiration approaches. Rho measures sensitivity to interest rate changes, and as time to expiration decreases, the impact of interest rates on option pricing diminishes for both calls and puts.
Statement II is correct: Theta (time decay) is:
Therefore, only Statement II is correct.
Correct Answer: B (II only)
Ultimate access to all questions.
Which of the following statements is correct? I. The rho of a call option changes with the passage of time and tends to approach zero as expiration approaches, but this is not true for the rho of put options. II. Theta is always negative for long calls and long puts and positive for short calls and short puts.
A
I only.
B
II only
C
I and II
D
Neither
No comments yet.