OPTION VALUATION

[abhishreshthaa]

Option Valuation


Option Premium = Intrinsic Value + Time Value



Intrinsic Value:

The exercisable value of the option.


Intrinsic value of a call option is the difference between the spot price and the strike price.


Intrinsic value of a put option is the difference between the strike price and the spot price.



S = 195
X = 200
Intrinsic Value
= 195 – 200
= 0
Time Value = 5


S = 200
X = 200
Intrinsic Value
= 200 – 200
= 0
Time Value = 0



S = 205
X = 200
Intrinsic Value
= 205-200
= 5
Time Value = 0


In-the-money


Option with intrinsic value



At-the-money

Exercise Price = Market Price


Out-of-the-money

No intrinsic value


some time value possible

 

[rosemarry2]

Option Valuation


Option Premium = Intrinsic Value + Time Value



Intrinsic Value:

The exercisable value of the option.


Intrinsic value of a call option is the difference between the spot price and the strike price.


Intrinsic value of a put option is the difference between the strike price and the spot price.



S = 195
X = 200
Intrinsic Value
= 195 – 200
= 0
Time Value = 5


S = 200
X = 200
Intrinsic Value
= 200 – 200
= 0
Time Value = 0



S = 205
X = 200
Intrinsic Value
= 205-200
= 5
Time Value = 0


In-the-money


Option with intrinsic value



At-the-money

Exercise Price = Market Price


Out-of-the-money

No intrinsic value


some time value possible

Hey friend,

Here I am uploading Notes on Option Valuation, so please download and check it.