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What Makes Up an Option Contract’s Value/Premium?

What Makes Up an Option Contract’s Value/Premium? Intrinsic value: Intrinsic value is the portion of the option's value that is directly related to the underlying security's current market price.  Extrinsic value: Extrinsic value on the other hand is the portion of the option's value that is determined by factors such as time to expiration and implied volatility. It reflects the potential for the option to gain additional value before expiration. The longer the time until expiration and the higher the implied volatility, the more extrinsic value an option will have. Extrinsic value decays over time as the option approaches its expiration date. This decline is what we call time decay, and it can significantly impact the option's value. Time decay...

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Order Types

Learn the differences between the types of orders you can place with your brokerage in order to purchase or sell shares of a company. Stocks can be purchased or sold using market orders, limit orders, stop loss orders...etc.

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