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. For a put to have intrinsic value at expiration, the futures price must be below the strike price.
Options are available with strike prices in various price increments.
These price listings are both above and below the price at which futures contracts are currently trading for each commodity. The two components of the option's premium are intrinsic value and time value. An option's intrinsic value is determined by the relationship between the underlying futures price and the option strike price. For More Details Chicago Board of Trade. Options on agricultural futures, a home study course .