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How Does the Total Premium of an OTM Option Relate to Its Time to Expiration?

The OTM option's premium (extrinsic value) increases with time to expiration, reflecting a higher probability of moving ITM.
Greeks.Live24.11.25

How Does the Total Premium of an OTM Option Relate to Its Time to Expiration?

The total premium of an OTM option is entirely composed of extrinsic value. This extrinsic value is directly related to its time to expiration: the longer the time to expiration, the higher the premium.

This is because more time increases the probability of the underlying asset's price moving favorably to make the option ITM, and it also increases the compounding effect of the risk-free rate.

How Does an Option’s Extrinsic Value Change as It Moves from OTM to ITM?
What Is the Concept of “Extrinsic Value” and How Does It Relate to ITM Options?
How Does an Option’s Moneyness Affect Its Premium?
Can an OTM Option Have Extrinsic Value? Explain

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