Definition of Extrinsic Value
What is Extrinsic Value
Extrinsic value refers to the current option price less the intrinsic value of an in-the-money (ITM) option if exercised immediately. If the option contract is out-of-the-money (OTM), the extrinsic value is equal to the current option price so if a stock is priced at $50 and the put option strike price is $45, the extrinsic value of that contract is $5.
The extrinsic value of an options contract is the less tangible part of the options price and it is determined by factors other than the value of the underlying asset. Extrinsic value is the part of the option price that accounts for the risk being taken by the underwriter of the option.
Extrinsic value is also known as time value since time is one of the main factors that affects extrinsic value as an option contract moves closer to expiration but other factors that influence the value include interest rates, dividends and volatility.
GlobEx Markets Financial Dictionary of Terms, Phrases and Concepts
The GlobEx Markets financial dictionary is a reference resource that provides the definitions and explanations of various financial terms, phrases and concepts that are used in international finance and global investing. It includes a broad range of financial terms, such as those related to stocks, bonds, currencies, commodities, options, futures, crypto and much more.
A financial dictionary can be useful for anyone who wants to learn more about finance and investing, or who works in the financial industry. It can help clarify the meaning of technical terms and the language used in financial publications, reports and other sources.
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There are several benefits to using the GlobEx Markets financial dictionary, including:
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