Skip to main content
Learn

What Is the Mathematical Relationship between Premium, Intrinsic Value, and Time Value?

Option Premium = Intrinsic Value + Time Value.
Greeks.Live14.11.25

What Is the Mathematical Relationship between Premium, Intrinsic Value, and Time Value?

The relationship is an additive one: Option Premium = Intrinsic Value + Time Value (or Extrinsic Value). The premium is the total price paid for the option.

The intrinsic value is the immediate profit, and the time value is the remaining portion that accounts for the probability of future profit and time remaining. This equation holds true for all options, regardless of their moneyness.

What Is the Relationship between Theta and an Option’s Time Value?
How Does the Relationship between the Strike Price and the Current Market Price Determine an Option’s Intrinsic Value?
What Mathematical Property of Elliptic Curves Provides Security for ECDSA?
What Is the Relationship between Intrinsic Value and “In the Money” Status?

About

Contact

Editorial Policy

Terms of Service

Privacy Policy

Cookie Policy

© 2025 Greeks.Live

All Rights Reserved

Greeks.Live RFQ

Build by Noo on Engine

Source: The content on this website is produced by Greeks.live's proprietary analysis systems, which utilize advanced Large Language Models (LLMs). This information might not be subject to a full human review before publication and may contain errors.
Responsibility: You should not make any financial decisions based solely on the content presented here. We strongly urge you to conduct your own rigorous due diligence and to consult a qualified, independent financial advisor.
Purpose: All information is intended for informational purposes only. It should not be construed as financial, investment, trading, or any other form of professional advice. News and data are not trading signals.
Risk: The cryptocurrency, derivatives, and options markets are highly volatile and carry significant risk. By using this site, you acknowledge these risks and agree that Greeks.live and its affiliates are not responsible for any financial losses you may incur.