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Options Formulas:
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The Options Call And Put Calculator calculates the intrinsic value of call and put options based on the current stock price and strike price. It helps investors determine the immediate value of their options contracts.
The calculator uses the standard options pricing formulas:
Where:
Explanation: The call option value is the difference between stock price and strike price when positive, otherwise zero. The put option value is the difference between strike price and stock price when positive, otherwise zero.
Details: Understanding option intrinsic value is crucial for options trading, risk management, and investment decision making. It represents the immediate profit if the option were exercised now.
Tips: Enter the current stock price and option strike price in dollars. Both values must be non-negative numbers. The calculator will compute both call and put option values.
Q1: What is intrinsic value vs time value?
A: Intrinsic value is the immediate profit if exercised, while time value represents the potential for future price movement before expiration.
Q2: When is an option "in the money"?
A: A call option is in the money when stock price > strike price. A put option is in the money when strike price > stock price.
Q3: What about options with time value?
A: This calculator only computes intrinsic value. Actual market prices include both intrinsic value and time value components.
Q4: Can options have negative value?
A: No, options cannot have negative intrinsic value. The minimum value is always zero.
Q5: How does expiration affect option value?
A: At expiration, option value equals intrinsic value only. Before expiration, options typically trade above intrinsic value due to time value.