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fin.option-premium-breakdown Calculator
Breaks down an option premium into intrinsic value (in-the-money amount) and time value (extrinsic premium). Time value decays to zero at expiry (theta decay) — it's the primary source of income for option sellers and the cost borne by option buyers.
Inputs
Spot
Current market price for immediate delivery. The starting point for options and derivatives pricing.
Strike
Reference formula or conversion factor shown for context.
Time Days
Reference formula or conversion factor shown for context.
Volatility Pct
Annualised standard deviation of returns, as a decimal (e.g. 0.2 for 20%). Higher volatility increases option value. Implied vol is derived from market prices.
Risk Free Pct
Return on a theoretically safe investment like a government T-bill. The baseline return everything else is compared against. Enter as a decimal (e.g. 0.05 for 5%).
Results
call option price ($)
Value of the right (not obligation) to BUY the underlying at the strike price. Valuable when market price exceeds strike. Loses value as expiration approaches with no movement (time decay).
intrinsic value ($)
The computed numeric or monetary value.
time value ($)
The computed numeric or monetary value.
d₁
Reference formula or conversion factor shown for context.