P
PropTally
LEARN
Sign inGet started
📋Options Trading FundamentalsLesson 7 of 888% through course

Intrinsic vs Extrinsic Value

6 min read

Intrinsic vs Extrinsic Value

Breaking Down an Option's Price

Every option's premium can be decomposed into exactly two components: intrinsic value and extrinsic value (also called time value). Understanding this breakdown is fundamental to knowing whether an option is fairly priced and how it will behave over time.

Sign up to continue learning

Create a free account to access more courses.

Sign Up FreeAlready have an account? Log in

Put your knowledge into practice

Track your prop firm accounts, analyze your trades, and grow as a funded trader with PropTally.

Sign Up Free