The amount of money options buyers are willing to pay for an option in anticipation that over time a change in the underlying futures price will cause the option to increase in value. In general, an option premium is the sum of time value and intrinsic value. Any amount by which an option premium exceeds the option's intrinsic value can be considered time value. Also referred to as Extrinsic Value.

Source: National Futures Association; published here with permission. This publication (Glossary of Futures Terms - An Introduction to the Language of the Futures Industry) is the property of the National Futures Association.

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