πππ¬π’ππ¬ π¨π πππ«π’π―πππ’π―ππ¬ - πππ«π πππ Topics covered: β’ Moneyness of an Option β’ Intrinsic value & Time value of an option β’ Why Intrinsic value & time value matters β’ Implied Volatility Time for a 𧡠Curated in collaboration with @AdityaTodmal
β’ Moneyness of Option contract: β’ ITM option β’ ATM option β’ OTM option
β’ Intrinsic Value of an option: β’ Positive payoff for the buyer
β’ Intrinsic value of ITM CE options = Spot- Strike
β’ Intrinsic value of an: i) ITM for a CE option: Positive ii) ATM for a CE option: Zero β’ Intrinsic value is never Negative
β’ Option Chain data representing ATM, OTM & ITM
β’ Example of Intrinsic value of a CE option
β’ Example of Intrinsic value of a PE option
β’ Lets not mess up our heads trying to understand greeks β’ Lets understand things that are useful for trading
β’ Time value is the additional amount over & above Intrinsic value β’ Options having higher time to expiration has higher Time value
β’ How Intrinsic value & Time value helps traders to understand the RR of options
β’ Why OTMs & ATMs have lesser value than ITMs
β’ Logic behind hero ya zero trade
β’ ITM option premium = Intrinsic value +Time value
β’ Implied volatility: β’ Volatility of a stock over the life of an option β’ IV impacts to both CE & PE in a similar fashion
β’ When does IV rise? β’ Stock is more volatile β’ Stock is near to its earnings release β’ Major events viz. elections, budget etc.
β’ This was a part III 𧡠on derivatives β’ You can check out the 2nd part here π https://x.com/niki_poojary/sta...
If you have missed to check the Part I on Derivatives β’ You can check out the 1st part here - Basics of Derivativesπ https://x.com/niki_poojary/sta... β’ If you β€οΈ this, why not share? β’ π the first tweet and help others find this 𧡠⒠Happy learning π€ to everyone!
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