Option Pricing Explained: Intrinsic vs Extrinsic Value
Dr. Jim Schultz debuted his new weekly show, "Know Your Options," on the tastylive network by explaining the fundamental components of option pricing: intrinsic value and extrinsic value. He demonstrated how knowing any two of the three parts (price, intrinsic value, extrinsic value) allows for calculation of the third, focusing on the long side for beginners. The segment detailed how intrinsic value represents an option's inherent worth and can never be negative, while extrinsic value encompasses time and volatility.
Understanding option pricing is crucial for beginners to navigate the complexities of options trading and make informed decisions about potential investments.
JIM SCHULTZ TASTYLIVE OPTION PRICING INTRINSIC VALUE EXTRINSIC VALUE