intrinsic value

Please understand intrinsic value, Let's say.

" If the stock is trading at 128.72 .What is the intrinsic value of the price of the option if the expiration is 10 days. "

 

Google

 

• 130 Call = 0
• 120 Call = $8.72
• 130 Put = $1.28
  
• 120 Put = 0

This applies to all option expirations, not just 10 days out. Do you notice the pattern?

 

correct me if I am wrong.

Intrinsic Value (Call) = Underlying Price – Strike Price
Intrinsic Value (Put) = Strike Price – Underlying Price

 

Only if it is in the money.

 

Hey sandeepsopc
I recommend you to read Option volatility & pricing by Natenberg
Options need to be taught by learning.. even experienced traders wrong sometimes

 

But intrinsic value cannot go negative.

 

The instrinsic value of a call is:

Max (Price - Strike; 0)

The intrinsic value of a put is:

Max (Strike - Price; 0)