I happened to find this question on another board and am keen to know the answer as well:
just a question about extrinsic value:
1) someone says extrinsic value IS time value; i used to think this is correct until i heard the second statement as follows:
2) extrinsic value is comprised of time value and volatility value and the latter comprises the most of extrinsic value.
ok here are my questions:
1) is statement 2 correct and statement 1 incorrect?
2) if statement 2 is correct, do i NEED TO calculate out of the extrinsic value how much belongs to the "time value component" and how much belongs to the "volatility component"?
3) if the answer to my 2nd question is "yes you need to", then how can i calculate it and then use it?