You would think that two options with the same underlying stock and strike prices would trade at the same price, but interestingly enough, they most often trade at different prices.
For example, as of November 20, 2006, Bank of America had a call option with a strike price of $50 that was set to expire in January 2007 (BAC AJ) and another one with the same strike price that was set to expire in January of 2009 (VBA AJ). In this case, BAC AJ was worth $5, whereas VBA AJ was worth $7.80.
The BAC option's worth on November 20 was fairly close to its intrinsic value (the underlying stock was trading at $54.96), but the other option with the same strike price was selling at a slightly higher price. The differences in time to expiration between these two options is what accounts for the differences in market price.
While an option's intrinsic value is one of the biggest determinants of its price, its time value also affects the price that a trader pays. Generally, for American style options, the longer the option's life before expiration, the more valuable it is because the option holder receives more opportunities to gain upside benefit with more time in hand.
For example, a call option for BAC with a strike price of $70 will be trading at lower values if its expiration is in a month compared to an expiration of two years. This is because it is unlikely that the stock will rise $15 in a month. On the other hand, the same option that expires in two years is usually considered more valuable because the underlying stock has more opportunity to grow to $70.
This time value decreases over time as expiration approaches. At the time of expiration, the option's value will reflect the option's intrinsic value.
For more information on options, see Options Basics Tutorial, Option Spread Strategies and The Importance Of Time Value.

What happens when a security reaches its strike price?
Learn more about the moneyness of stock options and what happens when the underlying security's price reaches the option ... Read Answer >> 
How do I change my strike price once the trade has been placed already?
Learn how the strike prices for call and put options work, and understand how different types of options can be exercised ... Read Answer >> 
How are call options priced?
Learn how aspects of an underlying security such as stock price and potential for fluctuations in that price, affect the ... Read Answer >> 
When is a call option considered to be "in the money"?
Learn about call options, their intrinsic values and why a call option is in the money when the underlying stock price is ... Read Answer >>

Trading
What Drives An Option's Price?
The primary drivers of an option’s price are the underlying stock’s current price, the option’s intrinsic value, its time to expiration and volatility. 
Trading
What Is Option Moneyness?
Get the basics under your cap before you get into the game. 
Trading
The Basics of Options Profitability
The adage "know thyself"and thy risk tolerance, thy underlying, and thy marketsapplies to options trading if you want it to do it profitably. 
Trading
A Newbie's Guide To Reading An Options Chain
Learning to understand the language of options chains will help you become a more informed trader. 
Trading
Getting Started In Forex Options
Stocks are not the only securities underlying options. Learn how to use FOREX options for profit and hedging. 
Trading
What's the Strike Price?
The strike price is the price at which a derivative can be exercised, and refers to the price of the derivative’s underlying asset. In a call option, the strike price is the price at which the ... 
Trading
Three Ways to Profit Using Put Options
A brief overview of how to profit from using put options in your portfolio.

Expiration Date (Derivatives)
The last day that an options or futures contract is valid. When ... 
Strike Price
The price at which a specific derivative contract can be exercised. ... 
Out Of The Money  OTM
A call option with a strike price that is higher than the market ... 
Bear Call Spread
A type of options strategy used when a decline in the price of ... 
At The Money
A situation where an option's strike price is identical to the ... 
Option Premium
1. The income received by an investor who sells or "writes" an ...