Time Decay
Explanation
Time decay is the primary source of profit for premium sellers and the primary cost for premium buyers. The rate of decay is non-linear: it accelerates significantly in the last 30-45 days before expiration. ATM options experience the highest absolute time decay. Calendar spreads exploit differential decay rates.
Example
An ATM call worth $5.00 with 45 DTE might lose $0.04/day initially but $0.15/day in the final week before expiration.