Extrinsic value
The portion of an option’s premium above intrinsic value — the market’s price for time and uncertainty. Also called time value, it decays to zero by expiration.
Extrinsic value is what option sellers are paid to collect and what option buyers must overcome. It is largest at the money, grows with time to expiration, and rises and falls with implied volatility.
Two options with identical intrinsic value can carry very different extrinsic value; comparing them is how traders judge relative richness across strikes and months.
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