Time to Expiration

Time to Expiration
The effect of time is easy to conceptualize but takes experience before understanding its impact due to the expiration date. Time works in the stock trader's favor because good companies tend to rise over long periods of time. But time is the enemy of the buyer of the option because, if days pass without a significant change in the price of the underlying, the value of the option will decline. In addition, the value of an option will decline more rapidly as it approaches the expiration date. Conversely, that is good news for the option seller, who tries to benefit from time decay, especially during the final month when it occurs most rapidly.