Can an Option Have Extrinsic Value but Zero Intrinsic Value? ⎊ Path

Can an Option Have Extrinsic Value but Zero Intrinsic Value?

Yes, an option can have extrinsic value but zero intrinsic value. This occurs when an option is at-the-money (ATM) or out-of-the-money (OTM).

For an ATM option, the strike price equals the underlying price, so intrinsic value is zero. For an OTM option, the strike price is unfavorable, so intrinsic value is also zero.

In both cases, the entire premium is composed of extrinsic (time and volatility) value.

What Is “Out-of-the-Money” (OTM) in the Context of a Protective Put?

How Does an Option’s Moneyness Affect Its Premium?

Define “In-The-Money,” “At-The-Money,” and “Out-Of-The-Money” Options

What Are the Practical Implications of Trading ITM, ATM, and OTM Options?

How Does ‘Moneyness’ Relate to an Option’s Intrinsic Value?

Why Is a Deep ‘Out-of-the-Money’ Option’s Premium Composed Entirely of Extrinsic Value?

What Is the Concept of “Extrinsic Value” and How Does It Relate to ITM Options?

Does an Out-of-the-Money Option Have Intrinsic Value?

Glossar

Can an Option Have Extrinsic Value but Zero Intrinsic Value?

Can an Option Have Extrinsic Value but Zero Intrinsic Value?

Glossar

Intrinsic Value

Intrinsic Value of an Option

Extrinsic Value