Which State of Moneyness Typically Has the Highest Extrinsic Value?
The At-the-Money (ATM) state of moneyness typically has the highest extrinsic value (time value). This is because the ATM option has the greatest uncertainty about its final outcome, and its intrinsic value is zero or near zero.
The option's premium is primarily composed of this time value, which reflects the possibility of a favorable price movement before expiration.
Glossar
Moneyness
Concept ⎊ Moneyness describes the intrinsic value relationship between an option's strike price and the current market price of the underlying asset, categorizing options as in-the-money, at-the-money, or out-of-the-money.
Highest Extrinsic Value
Valuation ⎊ Highest extrinsic value, within cryptocurrency options and derivatives, represents the portion of an option’s premium attributable to time to expiration and volatility expectations, exceeding the intrinsic value derived from the immediate exercise price difference.
Highest Gamma
Gamma ⎊ Gamma measures the rate of change of an option's delta relative to movements in the underlying asset's price.