Time value is the portion of an option’s premium beyond its intrinsic value: Time Value = Premium − Intrinsic Value. It’s driven by time remaining to expiry (via Theta) and implied volatility (via Vega), and shrinks to zero exactly at expiry. OTM options consist entirely of time value, since they have zero intrinsic value.
Related Reading
See the full formula with worked examples across ITM/ATM/OTM in Intrinsic Value vs Time Value: How Option Premium Is Built.