An options price is the sum of both it’s intrinsic and extrinsic values. Intrinsic value is the difference between the strike price and current market price for in the money options. Out of the money options always have an intrinsic value of zero. Thus, extrinsic value determines the price of the option using; time until expiration and Implied Volatility.
Options prices are available daily via the option chain within a desired broker. However, to determine an options fair market value at any given time a trader will need an options pricing model. The Black-Scholes or Binomial model are two of the more popular models available.
Option Pricing Analysis
At OptionID, we’ll use the pricing analysis section to identify;
- Time until Expiration
- Implied Volatility
- Intrinsic Value
- Current Stock Price
- Expected Stock Price
- Extrinsic Value
Time until Expiration
The amount of time remaining on an options contract. Generally referred to as “DTE” or days til expiration.
Discussed in detail on our Implied Volatility page. In short, it’s the markets expectation for future price movement.
The “real” value of an option contract at a particular time. Determined by subtracting the market price from the strike price of an option contract.
Current Stock Price
The current market price for a security.
Expected Stock Price
OptionID’s assumption about where price will be at or before expiration. Understand we are not investment advisers and we do NOT suggest you rely on our expectation of a future security price.
Price of an option using implied volatility and time until expiration. Generally referred to as “Time Value” of an option contract. The fair market price of an option contract determined by the relatively unknown criteria, volatility and DTE.
Hate options? Check out our sister site TickerID via the link below.