Series 3: 4.1.6.1.1. Finding Intrinsic Value

Taken from our Series 3 Online Guide

4.1.6.1.1. Finding Intrinsic Value

Step 1: Find out how much the option is in the money. This amount is equal to the option’s intrinsic value.

$1,277 – $1,260 = $17

Step 2: Compute time value.

time value = current premium – intrinsic value

time value = $29.60 – $17 = $12.60

Intrinsic Value and Time Value of Premium

Long Put

Short Put

Long Call

Short Call

Current market price

$1,260

$1,260

$1,260

$1,260

Option strike price

$1,277

$1,277

$1,277

$1,277

ITM amount (intrinsic value)

$17

$17

$0

$0

Current price of option

$29.60

$29.60

$12

$12

Intrinsic value

$17

$17

$0

$0

Time value

$12.60

$12.60

$12

$12

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