This past weekend, I had a run-in with another stock trader on tiktok who was convinced that options contracts have "no intrinsic value". When I asked him if he wanted to like debate me on that topic, he turned down my request. So I decided to create a podcast episode all about intrinsic value just for him (and for you of course!)

Before I started trading, I too often wondered where the prices of options came from. Why does one product that costs $30 have option contracts that are trading at $1, and another $30 product with option contracts trading for $5?! It didn't make any sense to me! That is until I learned about intrinsic and extrinsic values.

Extrinsic value is made up of two things: (1) time remaining in an option contract and (2) implied volatility (aka "uneasiness in price")

When it comes to Intrinsic value, any option contract that is OTM (out of the money) has ZERO intrinsic value. However, if the option contract is ITM (in the money), that contract does in fact have intrinsic value! 

How do you passively aggressively say "I told you so" on the internet? With a podcast episode of course!!

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If you have questions regarding today's episode, or any option questions in general, reach out to me at [email protected]!

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