Options: Time Value and Intrinsic Value
Interactive

Options: Time Value and Intrinsic Value

Intuition Publishing
Updated Sep 24, 2020

An option's value has both a time and intrinsic value component. The intrinsic value is the difference between the current price and the option's' strike price, while the time value is the additional amount that an option is worth due to potential future payoffs. Here we discuss both intrinsic value and time value and demonstrate how they are calculated.