Time premium of call option. Time value is basically the risk premium that the seller requires to provide the option buyer with the right to buy/sell the stock up to the expiration date. For example, if Company XYZ is trading for $25 and the XYZ 20 call option is trading at $7, then we would say that the option has an intrinsic value of $5 ($25 - $20 = $5).

Time premium of call option

Time Value and Intrinsic Value

Time premium of call option. {{Finance [1]}} In finance, the time value (TV) (extrinsic or instrumental value) of an option is the premium a rational investor would pay over its current exercise value (intrinsic value), based on the probability it will increase in value before expiry. For an American option this value is always greater than zero in a fair market.

Time premium of call option

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