™A $50 strike call with a $55 stock price and $7 premium contains $5 intrinsic and $2 time value per share in a simplified example.
Options
Time value
The portion of an option premium above intrinsic value.
Plain-English context
Put the definition to work.
The premium-minus-intrinsic convention is not a promised future return and may behave differently across exercise styles.
Further reading and verification. Examples are hypothetical, not current quotes or recommendations. Product terms, tax treatment and market rules can change. OCC / Options Industry Council — options basics