Extrinsic worth

Quantitative Finance Level 2

AMZN's current stock price is $380.16. The put option on the $385 strike expiring in 7 days is currently worth $7.10.

What is the extrinsic value of this option?

$2.26 $7.10 $0.00 $.4.84

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Calvin Lin by Calvin Lin

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2 solutions

The extrinsic value of the option:

Extrinsic value = Time value = Option price − Intrinsic value = Current worth − ( Strike price − Current stock price ) = $ 7.10 − ( $ 385.00 − $ 380.16 ) = $ 7.10 − $ 4.84 = $ 2.26 \begin{aligned} \text{Extrinsic value} & = \text{Time value} \\ & = \text{Option price} - \text{Intrinsic value} \\ & = \text{Current worth} - (\text{Strike price} - \text{Current stock price}) \\ & = \$7.10 - (\$385.00 - \$380.16) \\ & = \$7.10 - \$4.84 \\ & = \$\boxed{2.26} \end{aligned}

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Anna Anant
Mar 5, 2015

extrinsic = market value - intrinsic..........extrinsic = 7.10 - 385 - 380.16 = $2.26

0 Helpful 0 Interesting 0 Brilliant 0 Confused

Hm, can you check your equation? It evaluates out to -758.06.

Calvin Lin Staff - 6 years, 3 months ago

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