The time value of an option is the
A) difference between the price of the underlying security and the strike price.
B) value due to expectations that the price of the underlying security will rise above the strike price.
C) minimum value of the option.
D) option premium value.

Question

Quizplus · Accepted Answer

The time value of an option is the value that is attributed to the amount of time remaining until expiration, which can add to the chances that the option will move into-the-money before expiration due to expectations that the price of the underlying security will rise above the strike price. This expectation adds value to the option, even though it is not yet in-the-money.

The Time Value of an Option Is the