Which of the Two Values Is Most Affected by the Passage of Time?

The extrinsic value (time value) is the component most affected by the passage of time. The intrinsic value is determined solely by the difference between the strike price and the current market price, which is independent of time.

Time value, however, is a measure of the remaining opportunity for the option to become profitable. As the option nears expiration, this opportunity diminishes, and the time value erodes at an accelerating rate due to Theta decay.