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In the money

In the Money vs. At the Money Options: An Example

In the money vs. at the money options In the money options are options which have positive intrinsic value. This means that at the moment of expiration (when no time value is left), the option still represents some value if you exercise it. At the money options are options with strike price equal or very … Read more


Intrinsic Value of Options and Stocks

The concept of intrinsic value in finance Intrinsic value is a term frequently used for options and stocks, but it can be applied to any asset. As a financial term, intrinsic value of a security or asset describes the value that is contained in the asset itself. Intrinsic value is often referred to as fundamental … Read more


Measuring Directional Exposure with Delta

Delta: the king of the Greeks Delta, probably the best known of the option Greeks, measures an option’s directional exposure. Just by looking at delta, you can quickly tell whether an option or a portfolio of options will go up or down given a particular move in the underlying stock, and approximately by how much. … Read more


Delta of Calls vs. Puts and Probability of Expiring In the Money

What delta means Delta, the best known of the option Greeks, is a measure of directional exposure of an option. It is the first derivative of option’s market price with respect to the underlying’s price. Simply said, an option’s delta represents the dollar value by which the market price of the option changes when the … Read more


Time Value of In The Money Put Options

Call options In the previous article we have explained why time value of at the money call options is higher than time value of deep in the money call options (other factors being equal). The reason is that the closer to at the money an option is, the more it limits your maximum risk from … Read more


Time Value of In The Money Call Options

What does time value of options depend on? While an option’s intrinsic value is easy to calculate just by looking at its strike price and the underlying’s market price, time value doesn’t have any simple and quick formula like this. There are more factors influencing time value of an option. Among the most important are … Read more


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


In the Money, At the Money, Out of the Money

Moneyness of an option Moneyness is a strange sounding term, but it is sometimes used for describing the amount of intrinsic value an option has. All options belong to one of the three basic groups (and they can move between these groups as the market price of the underlying changes, as you will see below). … Read more