Ramesh has sold one month put option of equity share of Moon Ltd. @ ₹ 60. The strike price of the option is ₹ 600 and current market price is ₹ 572. What is the time value of the option when he is selling the option?

CS Professional · Capital Commodity and Money Market · PYQS · December 2019
Ramesh has sold one month put option of equity share of Moon Ltd. @ ₹ 60. The strike price of the option is ₹ 600 and current market price is ₹ 572. What is the time value of the option when he is selling the option?

Answer & Explanation:

The time value plus intrinsic value is total option value. Intrinsic value = Strike Price - Current Market Price Intrinsic value = ₹ 600 - ₹ 572 = ₹ 28 Total option value is ₹ 60 Time value = Total option value - Intrinsic value Time value = ₹ 60 - ₹ 28 = ₹ 32

Topics: Derivatives

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