Dictionary : Extrinsic Value
The difference between an option's price and the intrinsic value.
For example, an option that has a premium price of $10 and an intrinsic value of $5 would have an extrinsic value of $5. Denoting the amount that the option's price is greater than the intrinsic value, the extrinsic or time value of the option declines as the expiration date of an option draws closer.
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