Timeline for out of the money time value versus in the money time value
Current License: CC BY-SA 3.0
6 events
| when toggle format | what | by | license | comment | |
|---|---|---|---|---|---|
| Jan 31, 2016 at 9:14 | comment | added | mxzzzzz | looks strange. should be 150 or slightly less then 150. you should check if all other inputs (IV, rates, time) are unchanged. some exchanges update time to expiry almost real-time (every minute, for example). so 1 hour difference can be substancial. in general - change in time value with respect to change of underlying is almost symmetric with respect to ATM strike, i.e 1% up and 1% on underlying cause almost identical change in time value. so in your case it should be rather 150 than 120. | |
| Jan 29, 2016 at 11:46 | comment | added | rupweb | sorry we haven't explained the effect. I mean to say time value on in the money options > time value on out of the money options. The question is about how as an option moves into the money, the intrinsic value is not reflected in the premium (or price) of the option. The premium was 100 OTM then 1 hour later the option moved 50 pips ITM and the premium goes to 120 not 150... | |
| Jan 28, 2016 at 16:20 | comment | added | mxzzzzz | "premiums on in the money options > premiums on out of the money options" - yes, but this is obvious. when you are ITM you actually gain some real value (S-K). i did not get your idea on "negative effect on the greater intrinsic value". any move from ATM strike on either side is negative for time value. when underlying goes up from ATM strike then call loses time value (some portion of it) and gains intrinsic. when underlying goes down then call loses time value without any gain in intrinsic | |
| Jan 27, 2016 at 16:52 | comment | added | rupweb | Can we say premiums on in the money options > premiums on out of the money options? | |
| Jan 27, 2016 at 16:50 | comment | added | rupweb | "when you move into the money zone your premium rises". Yes, this must be the effect I have observed. Further (and obviously) the intrinsic value rises as well. So, as you move into the money, the change in premium > change in intrinsic value. But why? And how come that has a negative effect on the greater intrinsic value?! | |
| Jan 26, 2016 at 11:08 | history | answered | mxzzzzz | CC BY-SA 3.0 |