Duration

Duration is a word that means two quite different things depending on whether you're talking about options or bonds, and it's worth keeping the two apart in your head.

In options trading, duration is simply how much time is left before a contract expires. If you buy an option today and it expires in 30 days, its duration is 30 days — often written as "30 DTE" (days to expiration). This matters because an option's price is built partly from time: the more days remaining, the more chances the underlying stock has to move in your favor, so more time generally means more value, all else equal. As each day passes, that time value shrinks, a process called time decay, and it shrinks faster as expiration gets close.

In bond and fixed-income trading, duration means something more technical: a measure of how sensitive a bond's price is to a change in interest rates. It's expressed in years, but it isn't just "years until the bond matures" — it's a calculated figure that accounts for the size and timing of all the bond's cash flows (coupon payments plus principal). A bond with a duration of 5 will move roughly 5% in price for a 1 percentage-point move in interest rates, in the opposite direction (rates up, price down).

The trap for beginners is assuming these are the same concept because they share a name and both involve time. They're not. Options duration is a countdown clock to expiration. Bond duration is a sensitivity measure — a way of quantifying risk, not just marking time. If someone in a chatroom says "watch your duration" they're almost certainly talking about options DTE; if a fixed-income desk says it, they mean interest-rate sensitivity.