answersLogoWhite

0

Option value is composed of two components : Option value = Intrinsic value + time value Intrinsic value is the amount by which the option is in the money and given by the formula Max (0, S-X) Time value of option - this value depends on the time until the expiration date and the volatility of the underlying instrument's price. The time value of an option is always positive and declines exponentially with time, reaching zero at the expiration date. If the option is out of money its intrinsic value will be 0 but will still have time value of money and hence options sell higher than their exercise price.

Read more: http://www.justanswer.com/questions/1v2lv-options-sell-prices-higher#ixzz0NUj0iVGm

User Avatar

Wiki User

15y ago

What else can I help you with?

Related Questions

How does volatility impact the value of options?

Volatility affects the value of options by increasing or decreasing their prices. Higher volatility generally leads to higher option prices, as there is a greater chance of the option reaching a profitable level. Conversely, lower volatility tends to decrease option prices, as there is less uncertainty and risk involved.


Problem faced by consumer in daily life?

producers cheat consumers in various ways in everyday life: 1. selling products at prices higher than mrp esp. during festive season 2. adulteration of foods 3. selling expired medicines and foods 4. hoarding, and selling at higher prices during shortage


How does the concept of monopoly impact the selling of property in the real estate market?

The concept of monopoly in the real estate market can impact the selling of property by limiting competition and potentially leading to higher prices for buyers. When a single entity or a small group of entities control a significant portion of the market, they can dictate prices and terms, reducing options for buyers and sellers. This can result in less competitive pricing and potentially hinder market efficiency.


Why do call options with exercise prices greater than the price of the underlying stock sell for positive prices?

Because of the way call options work. If someone was selling calls on $50 stock for $45, that means he would be giving away $5 per share because everyone in the world would buy his $45 stock, immediately sell it for $50, deduct the premium paid and come out with a nice little profit. Stock options are priced using a formula that estimates what the price of a stock should rise or fall to in a certain period of time.


What impact do monopoly rent prices have on consumer choice and market competition?

Monopoly rent prices can limit consumer choice by reducing options and increasing prices. This lack of competition can stifle innovation and lead to higher costs for consumers.


What are the prices for cheap checks?

Cheap checks can be as cheap as $1.00 a box. A common price is about $2.49 a box. But can go much higher. The more ornate and options used the higher the price.


What is the role of options market making in the financial markets?

Options market making plays a crucial role in providing liquidity and efficiency to the financial markets by facilitating the buying and selling of options contracts. Market makers help ensure that there are always willing buyers and sellers for options, which helps to stabilize prices and reduce volatility.


How much are the 2011 Mercedes selling for?

Prices vary depending on model and options. Best thing to do would be to go to your local dealership and price them yourself. It will also give you an opportunity to test various options and see the colors and find the perfect car for you.


How did Hitler pledge to help German farmers?

by selling their product directly to consumers ....He sold their produce for higher prices - making up for all their losses during the Depression.


King George letter 1918 whats it worth?

King George's letters, dated 1918, to American soldiers are selling for about $30 through online auctions. There are several higher asking prices, but they are not selling. Condition greatly affects the price.


How do you perform a scale trade in commodities binary options?

Scale trading is a simple strategy of buying the asset at low prices and selling it when prices are high. However, finding entry point, that is bottom-low price in commodities market is not easy compared to other markets.


What happens to prices once things are over produced and selling?

the prices become lower on that "thing"