Options Pricing Introduction

In this video, we introduce the basics of how an option price is derived and get you familiar with moneyness terms like in-the-money, at-the-money and out-of-the-money.

In this video, we introduce option pricing and how this price is derived.

At a basic level, Option Price = Intrinsic Value + Extrinsic Value

After watching this video, you should be able to understand, at a basic level, what an option price means and how it's derived, some common terms describing where the underlying price is in relation to the strike price of the option and where to find this information in the system.

Video Contents

• Understanding Intrinsic vs Extrinsic value
• What is an in-the-money option (ITM)?
• What is an at-the-money option (ATM)?
• What is an out-of-the-money option (OTM)?
• Where to see moneyness of an option in the Implied Volatility system?