Which of the following is true for the time value of an option?
A) time value = option price - intrinsic value.
B) time value = intrinsic value + option price.
C) Time value is another name for intrinsic value.
D) Time value is zero for out of the money options.

Question

Quizplus · Accepted Answer

Time value of an option is calculated as the difference between the option's price (or premium) and its intrinsic value. This reflects the additional value attributed to the amount of time remaining until the option's expiration, during which the underlying asset has the potential to move in a favorable direction.

Which of the Following Is True for the Time Value