Time value refers to the portion of an option's premium that's attributable to the amount of time remaining until the expiration of the option contract. The premium of any option consists of two components: its intrinsic value and its extrinsic value.

Time value is a component of an option's extrinsic value beside implied volatility (IV). It relates to derivatives markets. It shouldn't be confused with the time value of money (TVM), which describes the discounting of money's purchasing power over time.