If an Option Is ITM, What Is Its Minimum Theoretical Price? ▴ Learn

If an Option Is ITM, What Is Its Minimum Theoretical Price?

The minimum theoretical price of an ITM option is its intrinsic value. An option's premium cannot trade below its intrinsic value because an arbitrage opportunity would immediately arise.

A trader could buy the underpriced option, exercise it, and profit from the difference, thus pushing the option's price back up to at least its intrinsic value.

What Is the Theoretical Maximum and Minimum Value for a Call Option’s Delta?

What Is the Formula for Calculating the Intrinsic Value of an ITM Call Option?

What Is the Difference between an “In-the-Money” (ITM) Call Option and a Put Option?

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