Chapter 03 · Section 3.1
Time value definition
Therefore: The closer an option is to expiration, the more quickly it loses time value. We previously defined time value in the following manner: Time value = option premium - intrinsic value
We know that time value decreases with time. But can time value sometimes increase?
a) no
b) yes
Time value is very narrowly defined: it is just whatever value an option has that is not intrinsic value.