Time Value

Time value is the part of an option's premium that isn't intrinsic value — it reflects the market's uncertainty about whether the stock still has room to move enough to matter before expiration. An out-of-the-money option has zero intrinsic value, so its entire premium is time value: a bet on the stock moving enough to change that. Time value doesn't erode steadily — it decays slowly at first and accelerates sharply in the final weeks before expiration (a pattern measured by theta). It's highest for at-the-money options, where the outcome is least certain, and shrinks as an option moves deep in- or out-of-the-money.