As you learned, every option has an expiration date, which is the last day you can exercise it or sell it ⏳

Imagine you buy a call option on Google stock with an expiration date of June 30th 🗓️

That means that on June 30th, the option will expire and become worthless – so you need to exercise it or sell it before then to avoid losing your money! 📅

But if Google’s stock price doesn’t rise above the strike price by June 30th, you won’t be able to exercise it, and it will most likely become worthless before then anyways 😞

This is because as the expiration date gets closer, the option’s premium decreases, even if the stock price stays the same 📉

This effect is called time decay, and it gets faster and faster as an option's expiration date draws closer – we’ll explore why this happens later in the journey 🕰️

For example, if your call option on Google expires in a week, its premium will drop more and more each day if the stock price doesn’t move, eventually going to zero 📦

Time decay is part of why options are significantly riskier than stocks.

If you just bought Google stock directly and its price didn’t change, at least you wouldn’t lose any money 💸