Editing Option time value (section)

==Time value==
'''Time value''' is, as above, the difference between option value and intrinsic value, i.e.

:<code>Time Value = Option Value − Intrinsic Value</code>

More specifically, '''TV''' reflects the probability that the option will gain in '''IV'''&nbsp;— become (more) profitable to exercise before it expires.<ref>[http://www.oxfordfutures.com/futures-education/option-premium-valuation.htm ''Option premium valuation '']  22 August 2007</ref> An important factor is the underlying instrument's [[Volatility (finance)|volatility]]. Volatility in underlying prices increase the likelihood and magnitude of a gain in IV, thus enhancing the option's value and stimulating option demand. Numerically, this value depends on the time until the [[Expiration (options)|expiration date]] and the [[Volatility (finance)|volatility]] of the underlying instrument's price. '''TV''' of American option cannot be negative (because the option value is never lower than '''IV'''), and converges to zero at expiration. Prior to expiration, the change in '''TV''' with time is non-linear, being a function of the option price.<ref>[http://demonstrations.wolfram.com/OptionsTimeValue/ Options: Time Value], wolfram.com</ref>