Now, true, it also increases the chance that the option will expire

deeper out of the money.

But that doesn't bother the option holder, as the payoff to finishing

a little out of the money, or deep out of the money, is identical in both cases.

You net at $0.

The final factor to consider is time to expiry for an option.

Generally speaking, this is very straightforward as it is analogous to

the situation we face with volatility as the time to expiry for

an option increases, so

to does the chance that the option will finish even deeper in the money.

In summary, we started the session by decomposing option values into

their constituent parts, intrinsic value, and time value.

We highlighted that even where an option had no intrinsic value,

where it was currently out of the money, it still had a positive time value.

We then discussed the six factors that impact upon both call and put options.