Home » Education » Basic Option Tutorial » What is an Option?
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INTRINSIC VALUE + TIME VALUE = OPTION PREMIUM (PRICE)
- Intrinsic value equals the amount the option in is the money. for a call to have intrinsic value the future price must be greater than the strike price. for a put to have intrinsic value the future price must be less than the strike price.
- Time value (or extrinsic value) is the amount an option is valued over intrinsic value.