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Put Option Price, Intrinsic, and Time Value

This is the second part of the article about calculating intrinsic and time value of options. Here you can read the first part: Call Option Price, Intrinsic, and Time Value. In the money put option example Now consider a put option (giving the owner a right to sell) on J.P. Morgan stock, expiring in December … Read more


Call Option Price, Intrinsic, and Time Value

Calculating intrinsic and time value of options This article might help you in case that you don’t fully understand the differences between an option’s market price, intrinsic value, and time value. It will show you how these three are related and how to easily calculate intrinsic and time value of an option, when you know … Read more


5 Basic Characteristics of Every Option

What defines every option Let’s summarize the basic characteristics (or parameters) which define every option. They are: Underlying asset Call vs. put Strike price Expiration date American vs. European Underlying asset Option is a derivative security, a contract giving the owner (buyer) of the option the right (but not the obligation) to buy or sell … Read more


Time Value of Options

Two options with different time to expiration Consider two options with the following characteristics: Both options are American Both options are calls The underlying of both options is Microsoft stock The strike price of both options is 40 The only difference between the two options is the expiration date. The first call option expires in … Read more