Option Trading Basics | Intrinsic value in option trading

Second video in our future and option series explains another basic term in option trading - Intrinsic value of an option contract. The intrinsic value of an option is, the money the option buyer makes from an options contract provided he has the right to exercise that option on the given day.

Option premium = Intrinsic value + Extrinsic value.
The intrinsic value of an options contract can never be negative. It can be either zero or a positive number.

Call option Intrinsic value = Spot Price – Strike Price
Put option Intrinsic value = Strike Price – Spot price

Time value = Time value refers to the portion of an option's premium that is attributable to the amount of time remaining until the expiration of the option contract.

Summary
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The intrinsic value of an option is the amount of money you would make if you were to exercise the option contract.
The intrinsic value of an options contract can never be negative. It can be either zero or a positive number.

Watch video in Malayalam 👇👇👇

Check all posts in our option trading series

1 - What is option trading | Option trading basics explained in Malayalam - https://www.teqmocharts.com/2022/07/option-trading-basics-imalayalam.html

2 - Option Trading Basics | Intrinsic value in option trading - https://www.teqmocharts.com/2022/07/option-trading-malayalam.html

3 -  What is call option | How to buy or sell a call option in Upstox - https://www.teqmocharts.com/2022/07/Call-option-malayalam.html

4 - What is put option | How to buy/sell put option in Upstox - https://www.teqmocharts.com/2022/07/what-is-put-option-how-to-buysell-put.html

5 - When to buy or sell a call or put option | 4 types of orders in options - https://www.teqmocharts.com/2022/07/when-to-buy-or-sell-call-or-put-option.html

6 - Moneyness of an option contract | In the money | At the money | Out of the money option contracts - https://www.teqmocharts.com/2022/07/moneyness-of-option-contract-in-money.html

7 - What is open interest in option trading | Open interest explained in Malayalam - https://www.teqmocharts.com/2022/07/what-is-open-interest-in-option-trading.html