Option value = connotation value+time value

The connotative value of option refers to the part of the option price that reflects the relationship between the final option price and the current futures price. As far as long options are concerned, its connotation value is the value that the current futures price is higher than the option transaction price. If the futures price is lower than or equal to the strike price, then the intrinsic value of the option is zero, but it cannot be negative; As far as short option is concerned, its connotation value is the part where the current futures price is lower than the option exercise price. If the futures price is higher than or equal to the strike price, then the intrinsic value of the option is zero. The connotative value of short options cannot be negative.

The time value of option refers to the time value of option. For example, the option price of a long option is 9, the exercise price is 75, and the futures price at that time is 78, so the connotation value of the option is 3, that is, 78-75, and the time value is 6, that is, 9-3. The time value of options not only reflects the time risk during option trading, but also reflects the risk of market price changes. During the validity period of the option, the change of the time value of the option is a process from big to small, from existence to absence. Generally speaking, the time value of an option is directly proportional to the duration of the option.

Intrinsic value: the actual value of options, that is, probability.

Time value: the financing cost of option investors investing in options.