Question

Before expiration, the time value of an in-the-money call option is always?

1) Zero
2) Positive
3) Negative
4) Cannot be determined

Answer 1

The time value of an in-the-money call option is always positive before expiration.

Step-by-step explanation:

In finance, the time value of an in-the-money call option is always positive before expiration.

The time value of an option is the difference between its total value and its intrinsic value. In-the-money options have intrinsic value because they are already profitable, but they also have time value because there is still time for the option to become even more profitable. Therefore, the time value of an in-the-money call option is always positive before expiration.