Question
Why is an American option with a longer time to expiration generally worth more than an otherwise identical option with a shorter time to expiration?
Why is an American option with a longer time to expiration generally worth more than an otherwise identical option with a shorter time to expiration?
(Select the best choice below.)
A.
The stock of the American option with the longer time to expiration will increase more.
B.
The American option with the longer time to expiration has all the same rights and privileges as the option with the shorter time to expiration, plus additional rights and privileges.
C.
The American option with the longer time to expiration has fewer rights and privileges than does the option with the shorter time to expiration.
D.
The American option with the longer time to expiration has all the same rights and privileges as the option with the shorter time to expiration, plus it must be exercised on the expiration date.
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