Time value (extrinsic)

The rest of an option’s price beyond intrinsic value — what you pay for the time and volatility remaining; it decays to zero by expiration.

Time value, also called extrinsic value, is the part of an option's premium that sits on top of its intrinsic value. If a call has $3 of intrinsic value but trades for $4.20, that extra $1.20 is time value: it's what buyers pay for the chance that the option moves further into the money before expiration.

In practice, time value reflects how much time is left and how much the underlying could swing (implied volatility). More days and higher volatility mean a fatter premium. As expiration approaches, theta chips away at it, and the decay speeds up in the final weeks. That's why sellers often like collecting time value while buyers are fighting against it.

A common mistake is buying a cheap out-of-the-money option that is pure time value and expecting a small stock move to pay off. If the stock barely moves, that extrinsic value can evaporate to zero even when you were technically right about direction.

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Educational use only. Quotes are delayed ~15 minutes and nothing here is financial advice. Options trading involves substantial risk of loss.