Why Is Time Value Often Referred to as “Extrinsic Value”?

Time value is referred to as "extrinsic value" because it represents the value derived from external factors, rather than the immediate profitability (intrinsic value). These external factors include the time remaining until expiration and the underlying asset's expected volatility.

It is the portion of the premium that the market is willing to pay for the possibility of the option to become ITM before it expires.