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Pricing Options: Time
How the passage of time affects option prices
Recap
You've done it! This is the end of the article – great work. Before we move on, let's do a little recap:
Option Prices & Time
- Extrinsic value decays as time passes
- Long options are disadvantaged by time decay
- Short options benefit from time decay
- Time decay is measured by Theta (Θ)
- Higher theta levels imply greater risk
- Theta levels increase in magnitude as expiration nears
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