Time Value = Option Price - Implicit Value

Where Implicit value of a call option is,

Implicit Value = Current Asset Price - Exersize Price With a minimum value of "0". An option cannot have a negative implicit value.

Examples

Current Asset Underlying the Option = $15

Option 1 = $.05

Call Exersize Price = $20.00

Implicit Value = $15 - $20 = -5 As we know an option cannot be negative we deduce it must have a Zero implicit value.

Time value = $0.05 - 0 = $0.05

Option 3 = $5.05

Call Exersize Price = $10.00

Implicit Value = $15 - $10 = $5 Thus option 2 has an implicit value of $5

Time value = $5.05 - $5 = $0.05