Time Value
The portion of an option's premium above its intrinsic value, paid for the possibility of a favourable move before expiry.
Formula
Time Value = Option Premium - Intrinsic Value
Unit
₹
In depth
Time value is the market's price for uncertainty, so it rises with the time remaining and with expected volatility, and it is largest for at-the-money strikes. Its defining property is that it must reach zero at expiry, which makes an option buyer a payer of rent and an option writer a collector of it. Decay is not linear: it accelerates in the final weeks and is fastest in the last days, which is why holding a long option into expiry is the most expensive part of its life. An option bought purely for time value with no move in the underlying loses money with certainty.
Worked example
A 24,000 call at 300 with the index at 24,000 is entirely time value. Thirty days later, with the index still at 24,000, the option is worth zero — a ₹22,500 loss on a lot of 75 with the underlying unchanged.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Time Value” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.