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Time Decay
Time decay describes the erosion of an option's extrinsic value as time passes, all else being equal.
Why it matters to you
An option buyer is working with a limited amount of time. Even if the underlying price does not move, an option may lose value as expiration approaches because there is progressively less time for a favorable move to occur. The rate of time decay is not constant.
Terms that sit next to this one
Option Premium