Capital Markets · Sales & Trading
Theta For Long-Dated Options
This problem asks how an option’s time decay changes when there is still a long period before expiration.
Interview question
- Difficulty
- Easy
- Topic
- Capital Markets
- Subtopic
- Sales & Trading
What this question trains
This question tests understanding of theta, which measures how an option’s value changes as time passes, all else equal. In investment banking interviews, candidates are expected to know how option Greeks behave across different maturities and moneyness levels, since this helps explain option pricing, hedging, and trading risk. The key reasoning is to compare the effect of time remaining on the rate of decay and to understand why interviewers care about the relationship between time value, expiration, and option characteristics.