Can an Option Be Both OTM and Have High Time Value?
Yes, an option can be both out-of-the-money (OTM) and have high time value. This typically occurs when the option has a long time until expiration and the underlying asset has high implied volatility (IV).
The long time and high IV create a high probability that the option could move significantly into the money, justifying a high premium (time value).
Glossar
Time Value
Duration ⎊ The temporal dimension inherent in cryptocurrency derivatives, options trading, and financial instruments fundamentally defines time value.
High Time Value
Momentum ⎊ The concept of high time value, particularly within cryptocurrency derivatives, reflects the sensitivity of an option's price to the passage of time, amplified by underlying asset volatility and market sentiment.
High Implied Volatility
Skew ⎊ High implied volatility, particularly when manifested as a pronounced skew in the volatility smile or smirk, signals elevated risk perception within cryptocurrency options markets.