I'm not sure if "time value" is the correct term, but if an option (still at least several months from expiry) is trading at the difference between its underlying stock's price and its strike price, are there any strategies that can take advantage of this fact? In theory, I would think there should be at least some "extra" value to the option based on its underlying stock's potential to increase in price.
For example, consider a stock trading at $7.50, with its January 2014 $4 call option trading at $3.50.
I understand that "trading at" is a vague term, and I may not be able to buy or sell the option easily because of large spreads, and there are commissions, etc. - but for the purposes of this question, assume that I can buy or sell the option for $3.50 after commissions at the same time that I can buy or sell the stock for $7.50 after commissions.