Extrinsic Value = Option Premium﹣Intrinsic Value. For example, if a call option has a total premium of $10 and an intrinsic value of $6, then the extrinsic value is $4.

Extrinsic Value = Option Premium﹣Intrinsic Value. For example, if a call option has a total premium of $10 and an intrinsic value of $6, then the extrinsic value is $4.

Time decay refers to the rate at which time reduces the value of an option. First, it's essential to understand that time decay is exponential and accelerates as expiration draws closer.

Time decay refers to the rate at which time reduces the value of an option. First, it's essential to understand that time decay is exponential and accelerates as expiration draws closer. The rate ...