What is time value?Time Value
The part of an option's price above its intrinsic value, reflecting the chance it gains value before expiry; it melts away over time.
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- Advanced Option StrategiesCalendar Spreads: Profiting from Different Decay Speeds
Sell a near-month option and buy a far-month option at the same strike. The near month's time value melts fast and the far month's slowly; if the stock sits near the strike, that speed difference is your profit.
- Options BasicsIntrinsic Value and Time Value
An option's price splits into two parts: what it's worth right now, and what it's worth because there's still time left.
- Options BasicsReading an Option Chain
That big T-shaped table in your trading app: strikes in the middle, calls on the left, puts on the right, each cell with a bid and an ask. Learn to pick out the contract you want.
- Options: Next StepsExercise, Assignment and Expiration Day
What actually happens on expiration day? In-the-money options are auto-exercised, sellers get randomly assigned, and your shares and cash change hands. Plus, why exercising early usually doesn't pay.
- Options: Next StepsThe Four Basic Positions
Compare long call, short call, long put and short put side by side, and tweak the payoff curves in real time.
- Options: Next StepsLEAPS Call vs. Short-Dated Call
For the same rise in the stock, why do a 30-day option and a 730-day LEAPS behave so differently?
- Options: Next StepsTime Decay (Theta)
Time value is like a melting ice cube: it shrinks every day, and melts faster the closer expiration gets.
Related terms
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Go to “Calendar Spreads: Profiting from Different Decay Speeds”