Intrinsic Value
Key Takeaways
✅ Only ITM options have intrinsic value.
✅ OTM and ATM options have no intrinsic value.
✅ Rocket Plus applies a 20% range check on Intrinsic value for ITM strikes >7%
✅ Navia applies a 15% range check on Intrinsic value
✅ Orders outside the allowed range will be rejected.
Intrinsic Value
Intrinsic value is the real worth of an option, calculated as the difference between the spot price and the strike price.
- Only In The Money (ITM) options have intrinsic value.
- At The Money (ATM) and Out of The Money (OTM) options do not have intrinsic value.
How Intrinsic Value is Calculated
Intrinsic Value=Spot Price−Strike Price (For Call Options)
Intrinsic Value=Strike Price−Spot Price (For Put Options)
Example: Basic Intrinsic Value Calculation
Spot Price | Option Type | Strike Price | Intrinsic Value Calculation | Intrinsic Value |
42,000 | Call Option (CE) | 40,000 | 42,000 - 40,000 | 2,000 (ITM) |
42,000 | Put Option (PE) | 44,000 | 44,000 - 42,000 | 2,000 (ITM) |
42,000 | Call Option (CE) | 42,000 | 42,000 - 42,000 | 0 (ATM) |
42,000 | Put Option (PE) | 42,000 | 42,000 - 42,000 | 0 (ATM) |
42,000 | Call Option (CE) | 44,000 | 42,000 - 44,000 | 0 (OTM) |
42,000 | Put Option (PE) | 40,000 | 40,000 - 42,000 | 0 (OTM) |
Intrinsic Value Check in Rocket Plus
- Options Checked: Strikes more than 7% ITM are monitored.
- Order Limit: Orders beyond 20% of intrinsic value will be rejected.
- ATM & Near ITM Options: No intrinsic value check due to high volatility.
Example: Intrinsic Value Limits in Rocket Plus
Spot Price | Option Type | Strike Price | Intrinsic Value | Rejected Order Price (-20%) |
40,000 | Call Option (CE) | 37,000 | 3,000 | less than 2,400 |
40,000 | Put Option (PE) | 43,000 | 3,000 | less than 2,400 |
Intrinsic Value Check in Navia Trading Platform
- Options Checked: Only ITM options.
- Order Limit: Orders beyond 15% of intrinsic value will be rejected.
Example: Intrinsic Value Limits in Navia Trading Platform
Spot Price | Option Type | Strike Price | Intrinsic Value | Rejected Order Price (-15%) |
40,000 | Call Option (CE) | 39,900 | 100 | less than 85 |
40,000 | Put Option (PE) | 40,100 | 100 | less than 85 |
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