Time Decay

An option has a limited life.

The value of an option decreases exponentially as it nears expiration.

This is called Time Decay. Some people call this the "Waterfall Effect". The Greek for time decay is Theta.

Time decay is fastest in the expiration month (4 weeks before expiration).

 Because of this rapid decay in the expiration month, we avoid buying options that has only got one month of time left before expiration (to avoid unnecessary time decay issues).

ext: Volatility ...