Finance glossary
Time Value
Definition
The portion of an option premium beyond its intrinsic value.
Time value reflects the chance an option will become more profitable before expiration. It is highest for at-the-money options and decays toward zero as expiration approaches, an effect measured by theta. Higher implied volatility and more time remaining both increase time value.
In a sentence
Most of the option's price was time value, which melted away as expiration approached.
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