Time value of an option

Time value of an option

The portion of an option's premium that is based on the amount of time remaining until the expiration date of the option contract, and the idea that the underlying components that determine the value of the option may change during that time. Time value is generally equal to the difference between the premium and the intrinsic value. Related: In the money.

Time Value of an Option

The portion of the value of an option determined by the amount of time until it expires and the likelihood that it will be in the money at that time. The time value of an option is generally calculated as the difference between the premium and its intrinsic value. See also: Time value of money.
References in periodicals archive ?
The time value of an option is affected by four variables and is a function of the probability that the value may change before the option expires.
50 strike, for instance, it appears that the front-month options were sold and the back-month options were bought, suggesting that perhaps this was a calendar spread, where institutions take advantage of the fact that time value of an option boils away faster and faster as an option approaches its expiration date.