Extrinsic value

The difference between an option's price and the intrinsic value.

Investopedia Says:
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 by which the option's price is greater than the intrinsic value, the extrinsic value of the option declines as its expiration date draws closer.

Related Links:
An introduction to the world of options, covering everything from primary concepts to how options work and why you might use them. Options Basics Tutorial
The mystery of options pricing can often be explained by a look at implied volatility (IV). The ABCs of Option Volatility
Take advantage of stock movements by getting to know these derivatives. Understanding Option Pricing

The value something has only insofar as it is conducive to something else; the opposite of intrinsic value.

Extrinsic value is value which arises because of an agreement: Although the intrinsic value of a €100 note is not much more than the value of any similar piece of paper with a comparable graphic on it, it has a practical value (an extrinsic value) of €100. This type of value is regularly associated with Representative money. If its issuing authority were to fail to honor the note's value, it would soon become nearly worthless.

See also

• Intrinsic value
• Value

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