How Does Time Value Affect an Option’s Moneyness?

Time value does not directly affect an option's moneyness, as moneyness is determined solely by the intrinsic value. However, time value is a crucial component of an option's total premium, especially for OTM and ATM options which have zero intrinsic value.

An option with more time until expiration has a higher time value, reflecting the greater probability that it could become in-the-money. Time value decays as the option approaches its expiration date.