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Options and Futures

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Premium (options)

An options price has two components. They are the intrinsic value and time value. Premium is often referred to as time value. In the money call option - option strike 65. Underlying security is 67. Option price is 3. This is two points of intrinsic value and 1 point of premium. An out of the money call where the strike price is 65 and the underlying security is at 63 and the price of the option is 1-1/2. The premium would be 1-1/2. As there is no intrinsic value.

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