Basics of Options Trading FAQs

What does intrinsic value of an option mean and how to calculate intrinsic value of an option ?

The intrinsic value of an Option refers to the price at which an option's strike price is in-the money. It can also be considered the value of an Option, if it was exercised today.

For call option

Intrinsic Value = Current price for underlying - Strike Prices

For put option

Strike Price = Intrinsic Value - Current price for underlying

If you have a Reliance Call Option priced at 900, and the stock's current price is 920, then your Option's intrinsic value will be:

920-900 = Rs 20

It is possible for the Intrinsic value to an underlying to be either positive or negative. It cannot be negative.

What is the work of Options ?

How many types of Options ?

What is strike price of option ?

When does Options expire?

What is the process for trading options ?

How futures and Options are different ?

How Nifty can be traded ?

What will happen when an option expires out of money ?

Do I have to pay margin in Options ?

How can the Options contracts be settled ?

What do you mean by Covered Options ?

When do you mean by Naked Options ?

What does American Options refers to ?

What does European option mean? ?

In Options , What is the meaning of At-The-Money , Out-of-the-Money (OTM) and In-The-Money ?

How to take decision on either to buy /sell call Option or put Option ?

Is it possible to trade on option of any stock or index?

How Square off and exercise an Option is different ?

What does time value of an Option mean ?

In options trading , what does moving averages mean ?