abhishreshthaa
Abhijeet S
What is an Option Contract ?
Option Contact conveys upon its buyer the right, but not an obligation to buy / sell the underlying security on the expiry date at a pre-determined price.
Intrinsic Value Formula
CALL INTRINSIC VALUE
Current Stock Price – Strike Price = Call Intrinsic Value
PUT INTRINSIC VALUE
Strike Price – Current Stock Price = Put Intrinsic Value
Premium Value Formula
All options include premiums or values over and above the option’s intrinsic value. Premium values vary based on three factors: the market anticipation of the volatility of the underlying security; the time remaining until the option’s expiration; and current interest rates.
Premium value is also known as time value or extrinsic value.
CALL PREMIUM VALUE
Call Option Price – Call Intrinsic Value = Call Premium Value*
PUT PREMIUM VALUE
Put Option Price – Put Intrinsic Value = Put Premium Value
Option Contact conveys upon its buyer the right, but not an obligation to buy / sell the underlying security on the expiry date at a pre-determined price.
Intrinsic Value Formula
- The intrinsic value of an option corresponds to the relationship between the option’s strike price and the current price of the underlying asset.
- The intrinsic value is the amount that an option is In-the-money (ITM). Out-of-the-money (OTM) options have no intrinsic value.
CALL INTRINSIC VALUE
Current Stock Price – Strike Price = Call Intrinsic Value
PUT INTRINSIC VALUE
Strike Price – Current Stock Price = Put Intrinsic Value
Premium Value Formula
All options include premiums or values over and above the option’s intrinsic value. Premium values vary based on three factors: the market anticipation of the volatility of the underlying security; the time remaining until the option’s expiration; and current interest rates.
Premium value is also known as time value or extrinsic value.
CALL PREMIUM VALUE
Call Option Price – Call Intrinsic Value = Call Premium Value*
PUT PREMIUM VALUE
Put Option Price – Put Intrinsic Value = Put Premium Value