5. What is an Options Contract? An agreement where the buyer, who has paid a premium, has the option of exercising the agreement and where the seller, who has received a premium, can be required to fulfill the agreement.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15. ATM, ITM, & ITM With XYZ at any price below 60, our 60 call is OTM. At any price above 60, it is ITM. And at 60 it is ATM.
16. ATM, ITM, & ITM With XYZ at any price above 60, our 60 put is OTM. At any price below 60, it is ITM. And at 60 it is ATM.
17.
18. Intrinsic and Time Value The chart on the left shows an In-the-Money call position with 2.00 worth of intrinsic value and 2.50 worth of time value. The chart on the right shows an Out-of-the-Money call position that has only 1.50 worth of time value.
19. Intrinsic and Time Value The chart on the left shows an Out-of-the-Money put position with 2.00 worth of time value and no intrinsic value. The chart on the right shows an In-the-Money put position with 3.00 worth of intrinsic value and 1.00 worth of time value.