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How does time decay affect the value of options in the digital currency industry?

avatarahmed abdualqaderDec 26, 2021 · 3 years ago1 answers

Can you explain how the concept of time decay influences the pricing of options in the digital currency industry?

How does time decay affect the value of options in the digital currency industry?

1 answers

  • avatarDec 26, 2021 · 3 years ago
    In the digital currency industry, time decay affects the value of options in a similar way as in traditional markets. As an option approaches its expiration date, its value decreases due to the diminishing time left for the option to be profitable. This is because the probability of the option's underlying asset reaching a certain price decreases as time passes. Traders should be aware of time decay when trading options and consider it as a factor in their decision-making process. By understanding the impact of time decay, traders can better manage their risk and optimize their trading strategies.