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If an Option Has $1 of Intrinsic Value and a $3 Premium, What Is the Time Value?

The time value is $2 ($3 premium minus $1 intrinsic value).
Greeks.Live22.11.25

If an Option Has $1 of Intrinsic Value and a $3 Premium, What Is the Time Value?

The option premium is the sum of intrinsic value and time value. Therefore, Time Value = Premium – Intrinsic Value.

In this case, Time Value = $3 – $1 = $2. The time value is the $2 portion of the premium that is due to the remaining time and implied volatility.

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