Time value of an option

Definition:

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.

Investing Essentials


Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

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Bear spread

Applies to derivative products. Strategy in the options or futures markets designed to take advantage of a fall in the price of a security or commodity. A bear spread with call options is created by... Read More

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