By Melody
We are hoping this to be an easy and simple lesson to introduce options to you. By following Options Basics' articles, you should be able to understand options and how to utilize options to either profit or protect your stock.
Time value is a big part of an options' value. It is the part of an option price that is based on its time to expiration. If you subtract the amount of intrinsic value from an option price, you're left with the time value. If an option has no intrinsic value (i.e., it's out-of-the-money) its entire worth is based on time value.
Let's look at an example:
If you look at the screenshot above, the current price of Tesla is $845.15. This means options with strikes higher than $845.15 are out-of-money options. These options have no intrinsic value, all of its option's prices are based on their time value.
For in-the-money call options, options in the screenshot above with strikes lower than the current price, their time value would be their option price minus the intrinsic value(the amount that option is in-the-money).
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