Talk:Option time value

Since theta is (according to the Greeks:

• The theta measures sensitivity to the passage of time (see Option time value). ${\displaystyle \Theta }$  is minus the derivative of the option value with respect to the amount of time to expiry of the option, ${\displaystyle \Theta =-{\frac {\partial V}{\partial T}}}$ .

the following sentence seems confused. "Note that theta does NOT reflect the sensitivity of the time value to the amount of time to expiry." I think there's something behind it, but...

Yeah, especially since the text states that

"Time value is simply the difference between option value and intrinsic value. Time value is also known as theta, or extrinsic value"

Theta is the sensitivity to the time to maturity. This is not the same thing as time value as it is defined in this text. I originally thought that 'time value' did indeed just refer to theta and went to check it here on wikipedia. Now I don't really know which is which, so I'm not comfortable updating the text. I think it's clear, though, that the text both defines time value as theta and as the part of the option value that is not intrinsic. So, yeah, the text is wrong and should be changed.

Willi5willi5 (talk) 12:30, 19 September 2008 (UTC)Reply

The graph at the bottom right had "at time value t" in the title. Both axis have the units of dollars however. Is this just meaning "at any time t"?

Techphets (talk) 13:20, 26 May 2009 (UTC)Reply

I hope I cleared this up with my footnote. The graph is correct -- it reflects the relationship between option price and underlying commodity price, at a particular instant in time, t. If there were MORE time remaining before expiration, the curved red line would be "higher" -- it's like an isobar graph. You could have 3-4 curves representing, say, 12, 9, 6, and 3 months left before expiration.

A Doon (talk) 21:31, 26 May 2011 (UTC)Reply

Does the option graph only demonstrate IV as related to a call option? If so it should be labeled as such. — Preceding unsigned comment added by 129.98.45.142 (talk) 22:36, 10 September 2013 (UTC)Reply

TV does NOT decay exponentially. In fact NOTHING decays exponentially to zero. An exponential decay asymptotically approaches zero but never "gets there". TV is typically approximately equal to the square root of the time remaining to expiration. — Preceding unsigned comment added by Humanzgnome (talk • contribs) 17:13, 6 May 2014 (UTC)Reply