Explain the Difference between Extrinsic and Intrinsic Value in Options ⎊ Path

Explain the Difference between Extrinsic and Intrinsic Value in Options.

Intrinsic value is the immediate profit realized if the option were exercised now. For a call, it is the greater of (Spot Price – Strike Price) or zero.

Extrinsic value, also known as time value, is the portion of the premium that exceeds the intrinsic value. It represents the value derived from the possibility of the option moving further into the money before expiration.

Theta decay exclusively erodes the extrinsic value.

What Is the Role of Theta (Time Decay) in a Strategy Betting on a Term Structure Shift?

How Does the Concept of “Time Decay” (Theta) in Options Relate to the Urgency of a Trade during a Mempool Spike?

Explain the Difference between ‘Intrinsic Value’ and ‘Extrinsic Value’ of an Option

What Is the Primary Difference between Intrinsic and Extrinsic Value in a Cryptocurrency Option?

How Does the Concept of “Volatility Premium” Relate to High Theta?

How Is the Extrinsic Value of an At-the-Money Option Calculated?

How Can a Trader Profit from Theta?

How Does Theta Affect Options on Volatile Cryptocurrencies?

Glossar

Extrinsic Value

Volatility ⎊ This component represents the portion of an option's premium driven by market uncertainty regarding the underlying crypto asset's future price movement.