Theta Measures an Option's

question 10

Multiple Choice

Theta measures an option's:

• A)intrinsic value.
• B)volatility.
• C)rate of time decay.
• D)sensitivity to changes in the value of the underlying asset.
• E)sensitivity to risk-free rate changes.

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Definitions:

Margin Of Safety

The difference between actual sales and breakeven sales, quantifying how much output or sales level can drop before a business incurs a loss.

Variable Expenses

Costs that change in direct proportion to changes in the level of activity or production volume, such as raw material costs.

Break-even Point

The point at which total revenue equals total costs, and no profit is earned or lost, often used to determine the feasibility of a business venture or product.

Unit Variable Expenses

Costs that vary directly with the production volume, calculated on a per-unit basis.