What is the difference between intrinsic and extrinsic value in the context of cryptocurrency options?
OhsungDec 26, 2021 · 3 years ago1 answers
Can you explain the distinction between intrinsic and extrinsic value when it comes to cryptocurrency options? How do these two concepts differ and how do they apply specifically to the cryptocurrency market?
1 answers
- Dec 26, 2021 · 3 years agoIn the context of cryptocurrency options, intrinsic value is the actual value of the option based on the current price of the underlying cryptocurrency. It represents the profit that could be made by exercising the option immediately. Extrinsic value, on the other hand, is the additional value of the option that is not based on the current price of the cryptocurrency. It includes factors such as time until expiration, market volatility, and market sentiment. Extrinsic value can fluctuate and is influenced by various market factors. In the cryptocurrency market, where prices can be highly volatile, understanding the difference between intrinsic and extrinsic value is important for assessing the potential risks and rewards of trading options.
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