Sponsored Link: The Billion-Dollar Code Wall Street Hides from You...

In The Money

There are six determinants to an option’s price:

  • Current price of the underlying security
  • Strike price of the option
  • Volatility
  • Days to option expiration
  • Interest Rates
  • Dividends (stock options only)

The option’s price can then be broken down into two parts: Intrinsic Value and Extrinsic Value.

  • Intrinsic value: This describes the relationship between the stock or commodity’s current price and the strike price of the option, and encompassesthe first and second items from the list above.
  • Extrinsic value: This describes the part of the option that encompasses the first through the fourth items in the list above.

These "moneyness" relationships are described in familiar terms: Out-of-the-money (OTM), at-the-money (ATM) and in-the-money (ITM).

Moneyness Articles on Smart Profits Report:

Out-of-the-Money Options: Buyer Beware, Seller… Take The Money

In the Money Options: Make Mondays Your Discount Stock-Buying Day

A Lesson On Time Decay: How To Go In the Money For Top Buys

Trading Deep-In-The-Money Covered Calls: Dividend Paying Stocks That Can Boost Income

Buying In-the-Money Options: A Profitable Exit Strategy for Expiration Week

Deep-In-The-Money Covered Calls: How to Beat Stocks with Less Risk

Smart Profits Report Site Map

Sign Up for The Smart Profits e-Report!
Share This Article:
  • E-mail this story to a friend!
  • Digg
  • del.icio.us
  • Facebook
  • Google
  • Propeller
  • Reddit
  • TwitThis
  • Live
  • NewsVine
  • StumbleUpon
  • Technorati
Leave a comment below

How One Company's Groundbreaking "Cancer Blaster" Could Make You Rich


While the World Health Organization predicts 12 million people will develop cancer in 2009, this little-known company is fighting the surge with its amazing cancer-killing device...

Although most people know nothing about it, this "Cancer Blaster" has already saved thousands of people around the world... Like Ohio resident, Caroline Brubaker, who says "with just three, pain-free outpatient visits, I had my life back" or Richard Swanson of Arizona who ended up cancer-free after just 4 hours of treatment...

The best part is, the company recently discovered an extraordinary breakthrough that could go mainstream in a matter of days... Read the full details to find out how you can get in ahead of the event - and be on your way to booking truly incredible gains.

Sign Up for The Smart Profits e-Report!