Hey, traders! Today, we're diving into an options fundamental: the difference between intrinsic and extrinsic value in an option premium. Whether you're new to options or a seasoned trader, this is an important concept to master.
Using a real-time example with Amazon, I break down:
✔️ How to calculate intrinsic value (the in-the-money portion)
✔️ How to determine extrinsic value (also called time value)
✔️ Why the Greeks—like theta and vega—only impact extrinsic value
Understanding this difference is key to making informed trading decisions.
#OptionsTrading #StockMarket #TradingEducation #SmartInvesting
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