What Is the Difference in Premium Composition between a Deep ITM and an ATM Option? ▴ Learn

What Is the Difference in Premium Composition between a Deep ITM and an ATM Option?

The premium of a deep in-the-money (ITM) option is composed mostly of intrinsic value, with very little time value remaining. Conversely, the premium of an at-the-money (ATM) option is composed entirely of time value, as its intrinsic value is zero or near zero.

This difference reflects the certainty of the ITM option's outcome versus the uncertainty of the ATM option's outcome.

How Does Theta Affect Deep In-the-Money Options versus At-the-Money Options?

How Is ‘Time Value’ Related to Intrinsic Value?

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

What Is the Relationship between ‘Moneyness’ and Intrinsic Value?