An option's time value is the difference between its market value and its intrinsic value.

Question

Quizplus · Accepted Answer

This statement is true. An option's intrinsic value is the difference between the strike price and the market price of the underlying asset. The time value is the additional value of the option beyond its intrinsic value, and reflects the potential for the underlying asset price to move in the option buyer's favor before expiration.

An Option's Time Value Is the Difference Between Its Market