What Are the Two Primary Components That Make up an Option’s Extrinsic Value?

The two primary components of an option's extrinsic value (time value) are: 1) The time remaining until expiration (represented by Theta), and 2) The expected volatility of the underlying asset (represented by Vega). More time allows for more opportunity for price movement, and higher volatility increases the probability of a favorable move, both contributing to a higher extrinsic value.