Time value is simply the amount of value one places on time. the more time to expiry,the greater the possibility that the option can move into a profitable position and thehigher the value investors will place on time.in the text you are asked to assume that the strike price is 50, the call option premiumis $4.55, the time value is $2.05 and the intrinsic value is $2.50.based on this information, you can assume that the price of the underlying stock mustbe $52.50.heres why:option price = intrinsic value + time value$4.55 = $2.50 + $2.05intrinsic value occurs when the option is in the money. for call options, to determinethe intrinsic value, you subtract the strike price form the market price of the stock:market price - $50 = $2.50market price = $52.50
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