As the option gets closer to expiration, time value is worth less and less, since the distribution of possible option payoffs gradually converges to the option's intrinsic value. At the expiration date, time value shrinks to zero and the option value is equal to its intrinsic value. Time value isn't a linear function. In other words, while time value shrinks to zero over the life of the option, this process starts out slowly and accelerates closer to the maturity date. As can be seen from the diagram, half of the time decay of this six month option occurs within the last 60 days of the option's life.
Most options traded have fewer than three months to maturity.
In other words, the most trading volume in the options market relates to options subject to the rapid time decay at the far right of the diagram in Figure 1. Another point worth mentioning is that while the diagrams depict the time decay for call options only, put options follow essentially the same pattern. Option Strategies Time decay has implications for investors wishing to trade options. Time erodes the total value of an option, all else being equal, which favours sellers. The investor may even lose money if the stock increases, if the increase isn't large enough to offset the time decay.