Intrinsic Value for CALL options:
Intrinsic Value = stock price - strike price.
If the stock price is below the strike price, then the option contains no intrinsic value. | Time Value for CALL options:
Time Value = Option Price - Intrinsic Value.
Therefore...
Time Value = Option Price - (Stock Price - Strike Price)
| Calls can be in-the-money (ITM), at-the-money (ATM) or out-of-the-money (OTM).
ITM: Stock Price is above the Strike Price of the call.
ATM: Stock Price is equal to the Strike Price of the call. In practice, the strike price that is nearest to the stock price is considered the at-the-money option.
OTM: Stock Price is below the Strike Price of the call. |
