There is a price for possibility.

Begin where the expiry lesson stopped

Slide 50 separated a call's expiry payoff from the premium originally paid. Before expiry, a further distinction matters: intrinsic value versus the option's remaining time value. For a simple call, intrinsic value is the positive difference between the underlying price and the strike, or zero if that difference is negative. An option on silver futures uses the specified futures contract as its underlying. Substituting an unrelated retail silver quotation would answer a different question.

Separate the two parts of a premium

Suppose an invented one-ounce call has a $30 strike, its underlying is $31 and its market premium is $2.50. The call has $1 of intrinsic value. The remaining $1.50 is time value: $2.50 minus $1. This is a hypothetical pricing illustration, not a listed contract or an estimate of a fair premium. It shows why the amount someone pays for an unexpired option need not equal the amount obtainable from its immediate exercise value.

Time is only one moving input

The remaining premium reflects more than the number of days on a calendar. The underlying price, strike, expected volatility, time remaining and other pricing inputs interact. Changes in volatility expectations can alter an option's price even if the underlying price is unchanged. All else equal, the passage of time generally reduces the time value of a conventional purchased option. But actual market prices do not have to fall smoothly each day, because other inputs can move at the same time.

At expiry, the remaining opportunity ends

At expiry, no time remains for a further favourable move, so the simplified option value reduces to its intrinsic value. That does not make an in-the-money option purchase profitable: the premium and costs still matter. Actual exercise, settlement and any resulting futures position follow the contract's rules. This distinction completes the earlier payoff lesson. The expiry diagram describes a terminal outcome; understanding a price before expiry requires both the contract details and the factors driving its remaining value.

FOLLOW THE EVIDENCE

Sources & further reading

Sources checked 14 November 2026. Reference organisations do not endorse this website. Price examples are hypothetical and educational.