Give a Practical Example of an ITM Bitcoin Call Option.
Assume the current market price of Bitcoin (BTC) is $45,000. A trader holds a BTC Call option with a strike price of $42,000.
Since the BTC price ($45,000) is higher than the strike price ($42,000), this Call option is In-the-Money. Its intrinsic value is $3,000.
The holder can potentially buy BTC at $42,000 and immediately sell it at $45,000, making a profit before considering the premium paid.
Glossar
Call Option
Entitlement ⎊ The core of a call option within cryptocurrency derivatives represents a contractual right, but not an obligation, to purchase a specified digital asset at a predetermined price, known as the strike price, on or before a specific expiration date.
ITM Call Option
Premium ⎊ An ITM Call Option, within cryptocurrency derivatives, signifies a contract where the strike price is below the current market price of the underlying asset, resulting in an intrinsic value component alongside the time value premium.
ITM Call Option Impact
Value ⎊ The primary impact of an In-The-Money (ITM) Call Option is its positive intrinsic value, representing the immediate profit realized if the option were exercised instantly.