Time Decay

The time value will decrease over time as the option moves forward. This is known as time decay. You might notice over time that this value will fall apart at a certain rate:

1. The time value will drop by about a third during the first half of the option’s life.
2. The other two-thirds of the time value will drop during the second half of the option’s life.
3. The option should decline all the way during the life of the plan.

Review how the time value might change as the option moves along. This could cause a dramatic shift in the value of the option and make it harder for you to potentially get a good rate on the option you wish to work with.