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Why do ATM options intuitively have higher Time Value (Extrinsic Value) than Out- and In-The-Money options?

Another way to look at it: The PnL gain from delta hedging is proportional to gamma and always positive. Gamma is highest at the ATM so you have higher PnL gain from the dynamic hedge - and this ...
Arshdeep's user avatar
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Why do ATM options intuitively have higher Time Value (Extrinsic Value) than Out- and In-The-Money options?

For an OTM option, time value represents the likelihood that the option ends up in-the-money, increasing its value over its current "intrinsic" value of zero. For an ITM option, time value ...
D Stanley's user avatar
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