An option's value is made up of intrinsic value and extrinsic, or time, value. The intrinsic value is how far the option is "in the money. " For example, if July silver were at 5.50, the July silver 5.25 call option would have 25 cents of intrinsic value. The balance of the option's value would consist of time value - how much time remained until the option's expiration. If a trader sold a July silver 6.00 call option, that option would be 50 cents out of the money and therefore have no intrinsic value. The full value of the option would consist of solely time value. July silver would have to move a full 50 cents before the option would be in the money and have any intrinsic value at all.

As a seller of options, you are selling time value. As long as July silver stays below 6.00, the option will have no intrinsic value. Its only value is time value; as time passes, the option's time value will erode, slowly at first, then accelerating towards the end. The movement in the futures OEM Service:
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