Basics About Options - IV

Before we move forward for Option Greek next leg lets first understand what is Intrinsic Value and Premium in Options...!!!

On our Basics about of Options we have already covered about different types of options,  strike price & moneyness of option.

Now lets try to understand what is Intrinsic Value (IV) & Premium w.r.t to Options. 

Intrinsic Value come to picture when any option is Slightly or nearby Deep in the money. Whereas if we talk about Premium then it core and only component of option. 

But if we talk about At the money option then it contains both Intrinsic Value(IV) & Premium 

Deep in the money Option contracts have only Intrinsic Value (IV). 

Lets try to understand via simple examples. 

Underlying Asset Quote	Strike Price	CE Option		PE Option
		Moneyness	IV or Premium or Both	Moneyness	IV or Premium or Both
10000	10400	Out of money	Premium Only	In the Money	IV Only
10500	10000	In the money	IV Only	Out of money	Premium Only
10200	10400	Out the money	Premium Only	In the money	Both
10500	10300	In the money	Both	Out the money	Premium Only

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Please note this blog post is for education purpose only. While utmost care is taken while writing this post but any human error cant be ruled out and we apologize for same in advance.