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Options Contract Value Formula:
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The Options Contract Value represents the intrinsic value of an options contract, calculated as the difference between the stock price and strike price multiplied by 100 (standard contract size). For call options, it's (Stock Price - Strike) × 100; for put options, it's (Strike - Stock Price) × 100.
The calculator uses the options valuation formula:
Where:
Explanation: The formula calculates the intrinsic value of an options contract. For call options, the value is positive when stock price exceeds strike price. For put options, the value is positive when strike price exceeds stock price.
Details: Accurate options valuation is crucial for traders and investors to determine fair contract prices, assess potential profits/losses, and make informed trading decisions in the options market.
Tips: Enter current stock price in dollars, strike price in dollars, and select the option type (call or put). All values must be positive numbers.
Q1: What is the difference between intrinsic and extrinsic value?
A: Intrinsic value is the real value if exercised immediately, while extrinsic value includes time value and volatility premium not captured in this calculation.
Q2: Why multiply by 100?
A: Most standard equity options contracts represent 100 shares of the underlying stock, hence the 100 multiplier.
Q3: What if the option is out-of-the-money?
A: Out-of-the-money options have zero intrinsic value. This calculator shows the minimum value (zero) for such contracts.
Q4: Does this calculator account for time decay?
A: No, this calculator only computes intrinsic value. For complete options pricing, time value and other factors must be considered.
Q5: Can this be used for all types of options?
A: This calculator is designed for standard equity options. Different multipliers may apply for index options or other derivatives.