How Does a Longer Time to Expiration Affect the Initial Time Value?
A longer time to expiration generally increases the initial time value of an option. More time means a greater chance for the underlying asset's price to move favorably, increasing the uncertainty and potential for profit.
This greater potential is priced into the option as higher time value.
Glossar
Initial Time Value
Valuation ⎊ Initial Time Value, within cryptocurrency options and financial derivatives, represents the theoretical price of a contract at the moment of inception, derived from a pricing model incorporating underlying asset price, strike price, time to expiration, volatility, and risk-free interest rates.
Longer Time to Expiration
Duration ⎊ Longer time to expiration in cryptocurrency options signifies a protracted period until the contract’s settlement date, influencing pricing models and risk profiles.
Time to Expiration
Decay ⎊ Time to Expiration, within cryptocurrency options and financial derivatives, represents the remaining lifespan of a contract before its termination and potential exercise or assignment.