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- Option_time_value abstract "In finance, the time value (TV) (extrinsic or instrumental value) of an option is the premium a rational investor would pay over its current exercise value (intrinsic value), based on the probability it will increase in value before expiry. For an American option this value is always greater than zero in a fair market, thus an option is always worth more than its current exercise value. For a European option, the extrinsic value can be negative. As an option can be thought of as ‘price insurance’ (e.g., an airline insuring against unexpected soaring fuel costs caused by a hurricane), TV can be thought of as the risk premium the option seller charges the buyer — the higher the expected risk (volatility • time), the higher the premium. Conversely, TV can be thought of as the price an investor is willing to pay for potential upside.TV decays exponentially to zero at expiration, with a general rule that it will lose ⅓ of its value during the first half of its life and ⅔ in the second half. As an option moves closer to expiry, moving its price requires an increasingly larger move in the price of the underlying security.".
- Option_time_value thumbnail Option_value.gif?width=300.
- Option_time_value wikiPageExternalLink basics5.html.
- Option_time_value wikiPageID "398439".
- Option_time_value wikiPageRevisionID "594022792".
- Option_time_value hasPhotoCollection Option_time_value.
- Option_time_value subject Category:Finance.
- Option_time_value subject Category:Options_(finance).
- Option_time_value type Abstraction100002137.
- Option_time_value type Communication100033020.
- Option_time_value type DerivativeInstrument106480506.
- Option_time_value type Document106470073.
- Option_time_value type LegalDocument106479665.
- Option_time_value type Option113241600.
- Option_time_value type Options.
- Option_time_value type Writing106362953.
- Option_time_value type WrittenCommunication106349220.
- Option_time_value comment "In finance, the time value (TV) (extrinsic or instrumental value) of an option is the premium a rational investor would pay over its current exercise value (intrinsic value), based on the probability it will increase in value before expiry. For an American option this value is always greater than zero in a fair market, thus an option is always worth more than its current exercise value. For a European option, the extrinsic value can be negative.".
- Option_time_value label "Option time value".
- Option_time_value sameAs m.023kh6.
- Option_time_value sameAs Q7099014.
- Option_time_value sameAs Q7099014.
- Option_time_value sameAs Option_time_value.
- Option_time_value wasDerivedFrom Option_time_value?oldid=594022792.
- Option_time_value depiction Option_value.gif.
- Option_time_value isPrimaryTopicOf Option_time_value.
