(1) intrinsic value

The intrinsic value of the option refers to the present value of the income that the buyer can get when exercising the option.

The calculation of intrinsic value is determined by the relationship between the execution price of option contracts and the market price of the subject matter.

Intrinsic value of call option = market price-strike price of the target.

Intrinsic value of put option = exercise price-market price of the subject matter

If the calculation result is less than 0, the intrinsic value is equal to 0, so the intrinsic value of the option is always greater than or equal to 0.

(2) Time value

Time value = option price-intrinsic value

For the option buyer, the time value reflects the possibility that the intrinsic value of the option will increase in the future, and the extra cost that the option buyer is willing to pay for this value is the part where the option premium exceeds the intrinsic value.

Option trading is time-limited, because having time means that the price of the underlying asset is more likely to fluctuate. Generally speaking, the longer the validity of the option contract, the greater the time value and the higher the cost of the royalty. As the expiration date of the option contract approaches, its time value gradually decreases until it is zero.

Friends who suggest semester rights can read the ferry option for three hours as the first step. The term right is easy to understand and understand.