In this regard, the premium for an option resembles an insurance premium for protection against price risk. The two specific aspects of an option contract are the underlying futures contract and the strike price of the option. Since the option gives the buyer the right to take a futures position, the contract specifications are identical to those of the related futures contract. Strike prices are listed at increments above and below the current futures contract price. The total cost of buying an option is equal to the option premium times the futures contract size plus commission.
Intrinsic value is the difference between the option strike price and the underlying futures price.
Intrinsic value cannot be less than zero. Time value is equal to the option premium less the intrinsic value. Time value represents the value of the remaining life of the option. An options value at expiration will reflect whatever amount of money the option holder could realize by exercising the option, i.e. the intrinsic value, if any, remaining in the option. For a call to have intrinsic value at expiration, the futures price must be above the strike price.