Time decay

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Time decay

Related: Theta
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Time Decay

The decline in value of an option contract as it approaches the expiration date. In an out-of-the-money option, the closer the contract is to expiry, the less likely it is that the option will become in-the-money, reducing its value. Time decay is also called time-value decay.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
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