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But there is a high probability that it will gain intrinsic value, given that only a small move in the market would be needed. The second component that makes up the option premium is time value. Time value is somewhat less specific than intrinsic value.

It is based entirely on the future expectations of price movements. By definition, time value is the amount of the premium that exceeds intrinsic value. However, this definition hardly seems complete. To understand time value, some factors that contribute to the creation of this value should be explained.