Time Value
Time value is the second component of the option value, except intrinsic value. It is the value of option's premium above its intrinsic value.
Time value is always positive or equal to zero, and it depends on volatility of the underlying asset's price and time before expiration date. On the date of expiration, option premium will be equal to its intrinsic value and the time value of the option will be zero.
Time value is also called time premium.
| Related Terms: Time Value of Money |