Time Value

This Issue in United States

Concept of Time Value in Futures Trading

In this context of financial law, the following is a definition of Time Value: That portion of an option’s premium that exceeds the intrinsic value. The time value of an option reflects the probability that the option will move into-the-money. Therefore, the longer the time remaining until expiration of the option, the greater its time value. Also called Extrinsic Value.

Time Value

Concept of Time Value in the context of derivatives contract, by the International Swaps and Derivatives Association (ISDA): The amount by which the premium of an option exceeds its intrinsic value. Where an option has no intrinsic value the premium consists entirely of time value.

Resources

See Also

• Derivatives Contract