Extrinsic value is also known as time value. The amount of time remaining in the option is a key value for pricing and determines how long the underlying has to move up or down at current or future volatility. Options pricing consists of two components: extrinsic value, and intrinsic value. Intrinsic value is defined by how much the option is in the money against the underlying (stock) at its current price. See the example below for a walkthrough. The extrinsic value is the remaining value of the option, once intrinsic value is subtracted, and its value is associated with time and volatility risk in the option contract or spread.