How do I value stock options?

How do I value stock options?

Valuing stock options involves understanding their intrinsic value and time value. Would you like to know more about these concepts?

Yes, what is intrinsic value?

Intrinsic value is the difference between the current stock price and the option's strike price. If the stock price is higher, the option has intrinsic value.

And what about time value?

Time value is the additional amount that investors are willing to pay for an option above its intrinsic value, reflecting the potential for future price movement.

How can I calculate both values?

You can calculate intrinsic value by subtracting the strike price from the current stock price. Time value can be estimated by subtracting intrinsic value from the option's market price.