Question 105—Writing Options
Answer 1 The time value of options
The key difference between options and stocks is that options are wasting assets. While all the factors listed in the question contribute to option buyers’ mortality, the wasting time value of options is the most important among them. As the clock keeps ticking towards option expiration, it reduces the value of an option: the buyer keeps losing money, while the writer (seller) is more and more secure in his possession of the money received from the buyer.
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