Definition, Examples & Resources:Intrinsic Value'
Intrinsic Value may be added to your Brutus Options Ranker Strategy but is less important than Extrinsic Value.
If you are building a net-short options trading strategy you may look to minimize or altogether avoid options and spreads with intrinsic value as it rarely affects the profitability of the trade and generally increases the capital requirements.
If the trader is trading a net-long options strategy, then Intrinsic Value is more important. The buyer may want to hold a trade with high intrinsic value to ensure the position behaves closer to the underlying stock (high delta). Generally, Delta or amount ITM is better suited for this unless the trader is specifically looking for optimize their strategy with this parameter.
Intrinsic Value can be found on the Strategy Tree Builder page within the Brutus Options Ranker under the Criteria List and the Gener
Breaking Down Intrinsic Value
Let's break down Intrinsic and Extrinsic Value with an example. Apple Inc. ($AAPL) at the time of writing is $139.91/share. Let's take a look at options on AAPL that are expiring in 243 days.mid price is $12.50 we have everything we need to calculate the Extrinsic Value: Extrinsic Value = Option Price - Intrinsic Value $7.59 (Extrinsic Value)= $12.50 (option price) - $4.91
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