An option premium is the price that traders pay for a call or put option contract.
The option premium consists of two main components: 1. Intrinsic Value 2. Time Value
The intrinsic value of an option is the difference between the underlying asset's current price and the option's strike price.
Time value is an option’s premium representing the probability that the buyer’s price may rise before expiration. It’s the difference between the option’s entire premium and intrinsic value.
Option premiums are calculated by adding an option’s intrinsic value to its time value.
Option Premium=Intrinsic Value+Time Value
In this case, the intrinsic value of the call option is: Intrinsic Value=24,141.95−24,100= 41.95 Since the option premium is 152, the Time Value is: Time Value= 152− 41.95 = 110.05
In this scenario, the intrinsic value of the put option is: Intrinsic Value=24,200−24,141.95= 58.05 The Time Value is: Time Value=145.40−58.05= 87.35