Time Decay

The loss of an option's time value as expiry approaches, usually faster near the end.

Example

If a share stays flat, an option premium of 3 may fall to about 1.9 halfway through and to zero at expiry.

Time decay works against option buyers every day and in favour of sellers, who are paid to bear the risk of large moves.

Time Value — The part of an option's premium above its intrinsic value, reflecting time left and expected volatility.
Expiry Date — The last date on which an option or futures contract exists; after it the contract ends.

You pay for intrinsic value, time and uncertainty - and time runs out — An option's price has two parts: what it would be worth if exercised now, and extra value for the time and volatility left. That second part shrinks to zero by expiry. (12 min)
Appraising one position: maximum loss, break-even, cost and what you are really betting on — Before any derivatives trade, write down five numbers. If you cannot fill them in, you are not evaluating a position - you are guessing. (11 min)