Time value refers to the excess of the premium over the intrinsic value before the option expires. That is, option premium minus intrinsic value. Generally speaking, when other conditions are constant, the longer the expiration time, the greater the time value of the option.

For example, if the futures price is 1,190 yuan/ton, then the intrinsic value of the May wheat call option with an execution price of 1,180 yuan/ton is 10 yuan. If the premium is 15 yuan, the time value is 5 yuan.

For another example, when buying a wheat call option with an execution price of 1,200 yuan/ton, the futures price is 1,190 yuan/ton. If the premium is 2 yuan/ton, then all 2 yuan/ton is time. Value (out-of-the-money options have no intrinsic value). As the option expiration date approaches, the time value of the option gradually decays. At expiration, the option no longer has time value. Option value is all intrinsic value.

Generally speaking, at-the-money options have the greatest time value and are usually the most actively traded. When an option is at-the-money, it is difficult to determine whether the option will turn into real value or out-of-the-money value. The buyer will make a profit when it turns into real value, and the seller will make a profit when it turns into out-of-the-money value. Therefore, it is the most speculative and has the greatest time value.

In-the-money option premium = intrinsic value + time value;

At-the-money option premium = time value;

Out-of-the-money option premium = time value .