Options Trading: Are You Doing Option Trading..? Learn About Intrinsic, Time Value: Most people have heard of call-and-put options and options trading. But how do trade options? What are the key features of options trading in India? We first.
Most people have heard of call-and-put options and options trading. But how do trade options.. What are the key features of options trading in India? Let us first understand what are call options. Many new investors and traders in the options market are interested in buying calls or puts because of the low-risk returns. Investors use options trading for short-term gains. Traders pay a premium to buy an option contract and use it to make a profit. To learn the best of options trading 5paisa.com Go to There is an opportunity to learn many things here. One can know stocks and shares of companies with various chart forms and reports to help in making various decisions. But this website will help you to become a professional options trader.
The intrinsic value of an option contract usually refers to the market value of the contract. Intrinsic value refers to how much money is currently in the contract. It means that the amount is higher than the price of the underlying asset. The strike price is the price at which both parties agree to buy or sell an asset internally in an option contract. The main difference between options and futures contracts is that in futures you have to buy or sell before the expiration date according to the legal contract. But you can decide on your own in the option contract. That means if you want to buy you can. Or if you want to sell, you can sell it. If not, you can leave it until the contract expires. For example. you spend Rs. 200 to hold an option contract with a strike price of Rs. 300 will be the price. The intrinsic value of this call option is Rs. 100 (300-200) will be.. i.e. when the intrinsic asset price is less than the strike price.
Time value is the additional amount that the buyer has to pay over and above the underlying value until the end of the contract. The option seller receives this amount for giving the option. As the option contract expires, the time value price also increases. If an option contract passes its expiration date, the price of the asset is higher than the strike price. For example, if one option expires in three months and another option expires in two months, the time value of the first option is higher.
The buyer pays the seller a premium to acquire the option contract. The premium is in two parts. Intrinsic value The option premium must be subtracted from the intrinsic value to arrive at the time value price. For example, if the Rs.200 options contract mentioned earlier has a premium of Rs.150, the intrinsic value is Rs.100. The time value of such a situation is 50 rupees (150-100).
