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Extrinsic Value

Time value of an option

What is Extrinsic Value?

Extrinsic Value The portion of an option's price above its intrinsic value. Also called time value. Extrinsic value decays to zero at expiration.

Complete Definition

The portion of an option's price above its intrinsic value. Also called time value. Extrinsic value decays to zero at expiration.

Example

AAPL at $155. The $150 call trades at $7. Intrinsic = $5, Extrinsic = $2.

Related Terms

Intrinsic Value Time Decay Theta

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