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Time Premium

   Also found in: Wikipedia 0.01 sec.
Time premium
Also called time value, the amount by which an option price exceeds its intrinsic value. The value of an option beyond its current exercise value representing the optionholder's control until expiration, the risk of the underlying asset, and the riskless return.

Time Value of Money
A fundamental idea in finance that money that one has now is worth more than money one will receive in the future. Because money can earn interest or be invested, it is worth more to an economic actor if it is available immediately. This concept applies to many contracts; for example, a trade in which payment is delayed will often require compensation for the time value of money. This concept may be thought of as a financial application of the saying, "A bird in the hand is worth two in the bush."


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However, short-term options traders with a stomach for risk might want to consider taking advantage of the stock's trading range to benefit from eroding time premium.
The purchaser should buy a title insurance policy which usually has a one time premium to insure the property against any possible but unseen title claims.
In order to solve it, the value of the time premium should be declining more rapidly as the option reaches its expiration.
 
 
 
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