As shown in the figure, the time value of an option will erode or "decay" to nothing by the time the option reaches its expiration.
It's important to note that the decay of time value ACCELERATES as the option gets closer to expiring. So, an option with six months until expiration will decay much more slowly than an option with one month until expiration.
The fact that options with different expirations decay at different rates is a phenomenon on which a trader may try to capitalize. Click "See Example" below. Keep in mind that the forces of stock price movement and implied volatility must be considered, too.
