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All else being held constant, an option loses value as its expiration date approaches.

Say it's Friday morning and I have an option that expires 1 week from now, next Friday. Will that option lose value incrementally over the course of each day, or is it repriced when the market opens each day? When is its time-value recalculated?

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  • Time decay is constant. Demand drives option price and it overides time decay. In its absence, the MM marks the option down continuously. IOW, based on his assessment of volatility, the MM sets the theoretically value and is the base price. Increased buying or selling will drive price up/down and away from that price.
    – Bob Baerker
    Jun 15, 2018 at 14:30

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No party external to the trade "sets" the price for an option: its actual price is entirely supply and demand driven. All else equal, its theoretical price will show smooth decay. Its time value is in that sense continuously recalculated.

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