When a call option is out of the money, its intrinsic value is zero but its time premium may be positive.

Question

Quizplus · Accepted Answer

This is because the time premium is based on the expected future movement of the underlying asset, and even though the option is currently out of the money, there is still a possibility that it may become in the money before the expiration date. Therefore, the time premium may still be positive.

When a Call Option Is Out of the Money, Its