Time Value

Time Value

Definition

In the case of a stock option, the value attributable to the possibility that the market price of the stock will increase over the term of the option, thereby enhancing the potential economic gain the option holder can realize by exercising the option. The longer the remaining term of the option, the greater the time value of the option, because there is more time available for the market price of the stock to potentially move in the option holder’s favor.

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