The "daily Call" From Option Alpha: Options Trading | Stock Options | Stock Trading | Trading Online

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to continue our discussion from yesterday and talk about option extrinsic value explained. In yesterday’s podcast, show number 492, we described what intrinsic value was for an option price. Now, it seems only fitting that we describe what the extrinsic value component of an option’s price is. Again, remember that an option’s price is mainly comprised of two different components, two different broad category components. The first is intrinsic value which is just the value should it be exercised right now which we discussed yesterday in show number 492. Today, we’re going to be talking about the other component which is extrinsic value. Extrinsic value is mainly comprised of time decay and volatility value in the contract. It’s just a fancy way of saying – How much value is in the contract because of how much time is left until expiration or how much value is in the contract because the stock might be