Stocks & Commodities V. 29:11 (33): Explore Your Options by Tom Gentile
Product Description
Explore Your Options by Tom Gentile
INTRINSICALLY BETTER?
Which is considered better to own, intrinsic or extrinsic premium?
That’s a broad question with no absolute answer, though some may suggest that traders refrain from owning extrinsic premium. As option traders, we should recognize that all extrinsic or time value eventually drops to zero. At expiration, all that’s left is real intrinsic value or the option has no worth whatsoever.
More important, having contract value left in the form of intrinsic premium at expiration isn’t the same as making a guaranteed profit. The reality is, you can buy 100% intrinsic value of, say, $5.00 in a deep call or put contract and end up with intrinsic value of $1.00 at expiration, or maybe nothing at all if the contract goes completely out-of-the money.
INTRINSICALLY BETTER?
Which is considered better to own, intrinsic or extrinsic premium?
That’s a broad question with no absolute answer, though some may suggest that traders refrain from owning extrinsic premium. As option traders, we should recognize that all extrinsic or time value eventually drops to zero. At expiration, all that’s left is real intrinsic value or the option has no worth whatsoever.
More important, having contract value left in the form of intrinsic premium at expiration isn’t the same as making a guaranteed profit. The reality is, you can buy 100% intrinsic value of, say, $5.00 in a deep call or put contract and end up with intrinsic value of $1.00 at expiration, or maybe nothing at all if the contract goes completely out-of-the money.
FOR THOSE ORDERING ARTICLES SEPARATELY:
*Note: $2.95-$5.95 Articles are in PDF format only. No hard copy of the article(s) will be delivered. During checkout, click the "Download Now" button to immediately receive your article(s) purchase. STOCKS & COMMODITIES magazine is delivered via mail. After paying for your subscription at store.traders.com users can view the S&C Digital Edition in the subscriber's section on Traders.com.
| Take Control of Your Trading. |
| Professional Traders' Starter Kit |
| All these items shown below only $299.99! |
| Click Here to Order |