Premium Kaise Banta Hai?

Overview

An option’s premium is made of two parts: intrinsic value, which is how much it is already in the money, and time value, the extra you pay for the time left to expiry. As expiry nears, time value decays toward zero.

Key takeaways

• Premium = intrinsic value + time value.
• Intrinsic value is what you would gain by exercising right now, never below zero.
• Time value shrinks as expiry approaches and as volatility falls.
• An out-of-the-money option has zero intrinsic value, only time value.

For education only. Not investment advice.