A term used to describe how the theoretical value of an option 'erodes' or reduces with the passage of time. Time decay is specifically quantified by theta.
See Also:
Time Decay: The amount of time premium movement within a certain time frame on an option due to the passage of time in relation to the expiration of the option itself. Time decay is used to describe how the theoretical value of an option reduces with the passage of time. Time decay is especially quantified by Theta.