Premium: The price of an option contract, determined in the competitive marketplace, which the buyer of the option pays to the option writer for the rights conveyed by the option contract. Often this word is used to mean the same as time value.

Time Value: The portion of the option premium that is attributable to the amount of time remaining until the expiration of the option contract. The difference between the premium paid for an option and the intrinsic value (whatever value the option has in addition to its intrinsic value ). As an option approaches expiration, the time value erodes, eventually to zero.