BANKING AFFAIRS

Detailed explanation-1: -Price of underlying asset is added into intrinsic value of option to calculate exercise price of option. The strike price (or exercise price) of an option is the fixed price at which the owner of the option can buy (in the case of a call), or sell (in the case of a put), the underlying security or commodity.

Detailed explanation-2: -Call Option Intrinsic Value = Current Stock Price – Call Strike Price. Intrinsic value is the difference between the underlying price and the strike price, to the extent that this is in favor of the option holder. In simple words, it is the value which is already available in the market.

Detailed explanation-3: -Intrinsic value is the value any given option would have if it were exercised today. Basically, the intrinsic value is the amount by which the strike price of an option is profitable or in-the-money as compared to the stock’s price in the market.

Detailed explanation-4: -When price of underlying asset increases then good option is buy call option. Buying a call option entitles the buyer of the option the right to purchase the underlying futures contract at the strike price any time before the contract expires.

Detailed explanation-5: -Time Value = Option Premium-Intrinsic Value Taking the same example as above, let’s say the Rs 200 Option has a premium of Rs 150. The intrinsic value is Rs 100. For this, the time value will be Rs 50 (150-100).