How Does the Time Remaining until Expiration Affect the Option’s Time Value?
The Time Value of an option is directly proportional to the time remaining until expiration. The longer the time to expiration, the greater the chance for the underlying asset's price to move favorably, thus the higher the Time Value.
Time Value erodes over time, with the decay accelerating in the final months before expiration.
Glossar
Time Value of an Option
Concept ⎊ Time Value of an Option, or extrinsic value, is the component of the premium that exceeds the option's intrinsic value, representing the premium paid for the possibility that the option will become profitable before expiration.
Time Value
Component ⎊ Time value, also known as extrinsic value, is a component of an option's premium that reflects the probability of the underlying asset's price moving favorably before the option expires.
Time Remaining until Expiration
Decay ⎊ Time Remaining until Expiration, within cryptocurrency derivatives, represents the diminishing value of an option or future contract as its expiration date approaches, directly impacting theta ⎊ the rate of time decay.
Time Remaining
Duration ⎊ The remaining time until an option's expiration, or its duration, is a primary input that directly influences the extrinsic value component of the option premium.