Chapter 3
Underlying Price vs Strike | ||
An option is worth at least as much as it is in the money
Underlying Price vs. Strike: The difference between the underlying stock price and the strike price has a direct effect on the price of an option. Consider a call option with a strike price lower than the price of the underlying stock. In the AAPL example, the option holder has the right to buy a stock trading at $51 for $50. This call option is in the money and has an intrinsic value of $1. Except in some unusual cases, options will be worth at least as much as they are in the money.
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