Time value is a component of the Extrinsic Value of an option and decays to zero over the option's lifetime. In the early stages, time value remains high because there is a greater opportunity for the its Strike Price to be more In The Money than it is currently. As Expiration approaches, time value diminishes more quickly. The extent to which the option's value is affected by the duration remaining is referred to as Theta and is one of the so-called 'Greeks' which determine option prices.
Contributed by: Ralph Windsor
Related Directory Entries
Featured Video View All
OIC Quick Concepts: Option Time Value
OIC training video explaining option time value.
External Links
Options Premium - Time Valuehttp://www.theoptionsguide.com/options-premium.aspx
Explanation of Time Value and its relationship to Intrinsic Value.
View Options Guide Strategy Finder in Options Market Glossary Directory
Option time valuehttps://en.wikipedia.org/wiki/Option_time_value
Wikipedia article explaining Time Value.
Options Pricinghttp://www.optionseducation.org/getting_started/options_overview/options_pricing.html
OIC article about options pricing which includes Time Value.
View OIC Options Glossary in Options Market Glossary Directory
Time Valuehttp://www.investopedia.com/terms/t/timevalue.asp
Investopedia article definition of Time Value.
Comments
There are currently no comments for this term.
Post a Comment
You must be registered and logged in to post a comment.