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If an Option Is At-the-Money, What Constitutes Its Premium?

An ATM option's premium is entirely composed of time value.
Greeks.Live22.11.25

If an Option Is At-the-Money, What Constitutes Its Premium?

If an option is at-the-money (ATM), its strike price is approximately equal to the underlying asset's price. Therefore, its intrinsic value is zero.

The entire premium of an ATM option is composed solely of time value (extrinsic value). ATM options have the highest time value relative to their premium.

How Does Vega Influence the Price of OTM Options?
How Does High Volatility in a Cryptocurrency like Ethereum Impact the Time Value of an ATM Option?
Does an Out-of-the-Money Option Have Intrinsic Value?
Why Is a Deep ‘Out-of-the-Money’ Option’s Premium Composed Entirely of Extrinsic Value?

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