Options, also known as "options", refer to the right of the holder to purchase or a certain number of underlying instruments within a specified period of time as agreed by both parties to the transaction. Options
Because options are made up of expiration dates, part of the option** is made up of time value. That is to say, when other factors remain constant, the passage of time will lead to a decrease in the value of time, that is, the option** will decrease accordingly.
Since options** are composed of intrinsic value and time value, when we calculate the intrinsic value, the time value can be calculated by the following formula:
Time Value = Option** Intrinsic Value.
The time value of an option, also known as extrinsic value, is the premium that the option buyer is willing to pay to buy the option when it is expected to extend over time, and changes in the underlying option market** are likely to increase the value of the option. It is another major component of options** and can reflect the option seller's willingness to accept the sale of options**.
During the validity period of an option, the change in the time value of the option is a process from large to small, from having to nothing. In general, the time value of an option is proportional to the length of the option's duration. The longer the expiration date, the greater the time value;As the last trading day of the option approaches, the time value becomes smaller and smaller, and when the option expires, the time value becomes zero.
Since the intrinsic value of at-the-money and out-of-the-money options is equal to 0. The premium (option value) will not be 0, so the time value of at-the-money and out-of-the-money options will always be greater than 0. There is a possibility that the time value of an in-the-money option is greater than or equal to less than 0.
The time value of an American option is always greater than or equal to 0, while the time value of a European option may be less than 0.
The intrinsic value of an option is also called intrinsic value, true value, etc., which is the part of the value in the option that reflects the relationship between the exercise of the option (or the exercise) and the market price of the underlying asset. In the case of a call option, its intrinsic value is the portion of the current underlying market price that is higher than the option's exercise**.
If the market price of the underlying is less than or equal to the exercise**, then the intrinsic value of the option is zero, but it cannot be negative;In the case of a put option, its intrinsic value is the portion of the current underlying market value that is lower than the option's exercise**. If the market price of the underlying is higher than or equal to the exercise**, then the intrinsic value of the option is zero, and the intrinsic value of the short option cannot be negative.
The market price of the underlying in an option contract has a great impact on the ** of the option contract. The underlying value is also the intrinsic value of the option contract, and the intrinsic value will also have an impact on the leverage ratio of the option contract and the rate of return on returns.
A 50ETF is a European-style option, and according to European-style options, it can only be exercised at the expiration of the contract, and options with a long expiration date do not necessarily contain all the opportunities for the exercise of options with a short expiration date. This complicates the relationship between the expiration date of a European-style option and the option**.
In options investing, volatility is the degree of volatility of the indicator, and it is the most important variable in the option pricing model.
European-style options are characterized by the fact that they can only be exercised on a specific date called the expiration date. That is, before the expiration date, the holder can only wait for the option to expire. While options can be bought and sold before the expiration date, they cannot be exercised in advance.
However, European-style options can be closed!Option liquidation refers to the process of options trading, in the process of options trading, the option buyer or seller conducts operations in the opposite direction on the option position held in the trading market before or on the expiration date, so as to exit the established option position, so as to achieve market risk control and profit locking. Option closing includes two operations, namely closing the position and selling to close the position.
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