Why Are Longer-Dated Options Typically More Expensive than Short-Dated Options for the Same Strike? ⎊ Path

Why Are Longer-Dated Options Typically More Expensive than Short-Dated Options for the Same Strike?

Longer-dated options have a greater extrinsic value, primarily time value, because there is more time for the underlying asset's price to move favorably before expiration. This increased probability of a significant price change justifies a higher premium.

They offer more flexibility and a lower rate of theta decay, which investors are willing to pay for.

Why Is the Time Decay (Theta) Less Significant for Long-Dated Options with High Vega?

How Does Time to Expiration Influence the Extrinsic Value of an Option?

How Does the Concept of “Carry” Relate to the Pricing of Long-Dated Crypto Futures and Options?

What Is the Impact of Time Decay (Theta) on an Option’s Time Value?

How Can a High Interest Rate Environment Affect the Premium of a Long-Dated Call Option?

How Does High Volatility Affect the ‘Theta’ of an Option?

Does the Underlying Asset’s Volatility Influence the Rate of Extrinsic Value Decay?

Why Does the Extrinsic Value of an Option Decay as It Approaches Expiration?

Glossar

Interest Rate Environment

Calibration ⎊ The interest rate environment, within cryptocurrency derivatives, functions as a critical calibration parameter for pricing models, notably those employing stochastic volatility frameworks like Heston.