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Fancy Way to Say: Time Decay The price of an option is made up of two components: intrinsic value time value. Intrinsic value is the true value of an option. In other words, it's what the option would be worth if it expired today. It is equal to zero or the amount by which the option is in the money, which ever is greater. Time value on the other hand is the amount of premium one pays to hold the option until expiration. All other things being equal, as the option draws nearer to expiration the time value of the option dwindles. Burn time is another way to talk about the effect time has on an option whose stock is range bound. Meaning, intrinsic value is not increasing to compensate for the loss of time value.