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Why Do ATM Options Have the Highest Extrinsic Value?

ATM options have the greatest uncertainty of final outcome, which translates to the maximum potential for future price movement and highest time value.
Greeks.Live23.11.25

Why Do ATM Options Have the Highest Extrinsic Value?

ATM options have the highest extrinsic value because they have the greatest uncertainty regarding their final outcome (expiring ITM or OTM). This uncertainty translates to the highest potential for future price movement in either direction, which is reflected in the maximum time value component of the premium.

Why Is Theta Highest for At-the-Money Options?
How Does the Concept of “Uncertainty” Relate to the Maximum Gamma Point?
How Does the Option’s Extrinsic Value Relate to the Point of Maximum Gamma?
Why Do ATM Options Generally Have the Highest Time Value?

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