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Demotage,

You wrote, I don't understand if there is an actual metric that tells you what time value 'should' be, or whether it is just basically bid up and down by the market.

I believe it's usually by the market, if there is any activity ... else by a market maker. The market maker should be using the Black Scholes Model to determine an ideal option price, especially in the absence of any current offers. See:

http://www.investopedia.com/university/options-pricing/black...
https://en.wikipedia.org/wiki/Black%E2%80%93Scholes_model

Any good online broker should have some tool that will give you the Black Scholes pricing for an option and let you tweak some of the parameters of the model and give you derivative information about the contract's pricing history. For instance, TD Ameritrade calls this information "Greeks/Analytics". The theoretical price for your Jan'16 3.50 calls is 0.52, given TD Ameritrade's default assumptions. However the Bid/Ask spread is very wide (0.20/0.85), which could mean there is little interest in the contracts or it could just mean I looked after the market closed.

BTW the guys that invented this formula won the 1997 Nobel Prize in Economics.

- Joel
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