What Is the Maximum Time Value an Option Can Have?

An option's time value is maximized when the option is at-the-money (ATM), meaning the strike price is equal to the underlying asset's price. At this point, the option has zero intrinsic value, and its entire premium is composed of time value, reflecting the maximum uncertainty about its future profitability.

As an option moves deep in-the-money or out-of-the-money, its time value decreases.