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time value

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The market value of an option over and above its intrinsic value. The time value represents the value of the possibility that a movement in the price of the underlying will make the option worth exercising, even if it is not currently in the money. This value declines exponatially as the expiry date approaches. At expiry the value of an option, if any, consists solely of its intrinsic value. See also theta.

Subjects: Social sciencesEconomics

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