Option Time Decay

This problem practices a core options concept, time decay, and the role of theta in measuring how an option loses value as time passes. Candidates need to understand the difference between time value and intrinsic value, and why options with less time remaining have less opportunity to move favorably, which affects how quickly their value erodes. Interviewers ask this because option pricing is central to sales and trading, and a good answer shows that the candidate understands the basic drivers of option value and how those drivers change as expiration approaches.