How Does the Premium of a Deep ITM Call Option Relate to the Cost of Buying the Underlying Asset Outright? ▴ Learn

How Does the Premium of a Deep ITM Call Option Relate to the Cost of Buying the Underlying Asset Outright?

The premium of a deep ITM call option is approximately equal to the underlying asset's price minus the strike price, plus a small amount of remaining extrinsic value. The relationship is governed by the intrinsic value component, which dominates the premium.

For a very deep ITM call, the premium will be slightly less than the cost of buying the underlying asset outright, providing a form of leveraged exposure.

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