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 >> 
What is the difference between in the money and out of the money?
Learn about how the difference between in the money and out of the money options is determined by the relationship between ... Read Answer >> 
How do I set a strike price for an option?
Learn about the strike price of an option and how to set a strike price for call and put options depending on risk tolerance ... Read Answer >>

Trading
Getting Acquainted With Options Trading
Learn more about stock options, including some basic terminology and the source of profits. 
Trading
Income Strategies for Your Portfolio to Make Money Regularly
Discover the optionwriting strategies that can deliver consistent income, including the use of put options instead of limit orders, and maximizing premiums. 
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
The Importance Of Time Value In Options Trading
Move beyond simply buying calls and puts, and learn how to turn timevalue decay into potential profits. 
Trading
Understanding Option Pricing
Take advantage of stock movements by getting to know these derivatives. 
Trading
What Is Option Moneyness?
Get the basics under your cap before you get into the game. 
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
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.

Time Value
The portion of an option's premium that is attributable to the ... 
Vertical Spread
An options trading strategy with which a trader makes a simultaneous ... 
Strike Price
The price at which a specific derivative contract can be exercised. ... 
Expiration Date (Derivatives)
The last day that an options or futures contract is valid. When ... 
Bear Call Spread
A type of options strategy used when a decline in the price of ... 
Expiration Time
A specified time, after which the options contract is no longer ...