English Expression · Intermediate
time decay
The depreciation in value of an options contract as it nears its expiration
Pronunciation: say time decay
Meaning
The reduction in the value of an options contract as the expiration date approaches, due to the decreasing probability of the option becoming profitable.
Example
Investors must account for time decay when holding short-term options as the contract value erodes daily.
Investors must account for time decay when holding short-term options as the contract value erodes daily.
Practice tips
- Practice time decay out loud — read the pronunciation guide above and repeat.
- Use it in your own sentence today; reuse beats rereading.
- Pay attention to context: this English expression is for intermediate-level learners.