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+The Intelligent Investor’s Guide to Option Pricing  •  65
+It is clear from the large area of the exposure range bordered by the 
+BSM probability cone that this option will be fairly expensive.
+Let’s now look at an option struck at the same price on the same un-
+derlying equity but with only one year until expiration:
+Advanced Building Corp. (ABC)
+5/18/2012 5/20/2013 249 499 749 999
+100
+90
+80
+70
+60
+50
+40
+30
+20
+Date/Day Count
+Stock Price
+GREEN
+Consistent with our expectations, shortening the time to expiration 
+to 365 days from 730 days does indeed change the likelihood as calculated 
+by the BSM of a call option going above $60 from quite likely to just barely 
+likely. Again, this can be confirmed visually by noting the much smaller 
+area of the exposure range bounded by the BSM probability cone in the 
+case of the one-year option versus the two-year one.
+Indeed, even without drawing two diagrams, we can see that the 
+chance of this stock rising above $60 decreases the fewer days until expira-
+tion simply because the outline of the BSM probability cone cuts diagonal-
+ly through the exposure range. As the cone’s outline gets closer to the edge 
+of the exposure range and finally falls below it, the perceived chance falls 
+to 16 percent and then lower. We would expect, just by virtue of the cone’s 
+shape, that options would lose value with the passage of time.
+This effect has a special name in the options world—time decay. Time 
+decay means that even if neither a stock’s price nor its volatility change very 
+much over the duration of an option contract, the value of that option will