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What is the intrinsic value of a put option in the context of cryptocurrency?

avatarAmzad KhanDec 27, 2021 · 3 years ago1 answers

Can you explain the concept of intrinsic value in relation to put options in the cryptocurrency market? How does it differ from the extrinsic value?

What is the intrinsic value of a put option in the context of cryptocurrency?

1 answers

  • avatarDec 27, 2021 · 3 years ago
    In the context of cryptocurrency, the intrinsic value of a put option is the value that the option would have if it were exercised immediately. It is calculated by taking the difference between the strike price of the option and the current market price of the underlying cryptocurrency. If the market price is below the strike price, the put option has intrinsic value. However, it's important to note that the intrinsic value of a put option can never be negative. If the market price is above the strike price, the put option has no intrinsic value and is considered out of the money. The extrinsic value of a put option, on the other hand, represents the time value and volatility premium of the option, and can be positive or negative depending on market conditions.