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Time valueThe second component of warrant premium is time value. It is the difference between the premium and its intrinsic value.
Time Value = Premium - Intrinsic Value
From the above it follows that at expiry (when time value equals zero) an out-of-the money warrant is worthless and an in-the-money warrant is worth it’s intrinsic value. Note than since a warrqant cannot have negative intrinsic or time value the most a warrant holder can lose (and the most a writer can make) is the premium, no matter how much the underlying price changes.
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