Time value

Time value is defined as the option value minus intrinsic value and is rarely negative,
since option value is usually greater than intrinsic value. Time value is greatest for
at-the-money-options and declines at a declining rate as the option goes in- or outof-
the-money.
The following restriction pertains to sets of American options which are identical
in every respect – exercise prices, underlying asset – except their times to maturity.
Ω A plain-vanilla American call or put option must be worth more than a similar
option with a shorter time to maturity.
This restriction does not necessarily hold for European options, but usually does.