Indices DJIA S&P 500 DAX 30 Nasdaq 100 Nasdaq Comp Nikkei 225 FTSE 100 SMI DJ Stoxx 50 CAC 40 Hang Seng Kospi Nyse Comp AMEX   -     -     -     -     -     -     -     -     -     -     -     -     -     -   10911 1137.4 5732.4 2127.7 2438.1 8981.9 5072.1 4984.1 2161.9 5732.4 19614.7 1817.4 7017.6 2174.7 Commodites Light Crude Oil Brent Crude Copper Gold Pallad Platinum Silver Dow Diamonds QQQQ   -     -     -     -     -     -     -     -     -   83.08 106.28 1.17 1758.7 730.5 1782 38.21 109.16 55.42 Last update: 11-08-2011 14:29:00 (GMT - Live)

Time Value Decay Option, Call Option, Put Option, Option Buyer, Option Seller, Puts and Calls In-the-money, At-the-money, Out-of-the-money Delta The option strike price Time Value Decay Strategy A: Buying calls to take advantage of a rising stock market Strategy B:Buying put options to profit from declining live cattle prices Strategy C: Straddles Using Options on CME E-mini S&P 500 futures Basic Option Strategies: Initiating a Market Position Long Futures (1 Long April Live Cattle Futures) Short Futures (1 Short September Euro FX Futures) Synthetic Long Futures (Split Strike) Long Butterfly Long Straddle Ratio Call Spread Call Ratio Backspread Box or Conversion / Reversal Futures or Options? As discussed in the previous section, the value of an option beyond intrinsic value is called time value. It is the sum of money option traders are willing to pay given the likelihood of the option increasing in value. Time value erodes as each day passes, accelerating as expiration nears. This characteristic of options is referred to as time-decay and is the reason why options are sometimes considered "wasting assets". If time passes and the underlying futures contract does not move far enough by expiration, the option’s time value will decay and the option trader may incur a loss. The graph below illustrates the principle of time decay and its acceleration as expiration draws near. source: