NISM Certifications · NISM-Series-VIII: Equity Derivatives · Introduction to Options
A Nifty call option with strike 22,000 is trading at a premium of Rs 150 when Nifty spot is 22,100. What is the time value of the option per unit?
Time value is Rs 50. The call's intrinsic value is spot 22,100 minus strike 22,000, which equals Rs 100. Subtracting this from the premium of Rs 150 leaves Rs 50 as the time value component of the option price.
- ARs 100
- BRs 50Correct
- CRs 150
- DRs 250
Explanation
Intrinsic value of a call = spot - strike = 22,100 - 22,000 = 100. Time value = premium - intrinsic = 150 - 100 = 50. Rs 100 is the intrinsic value itself, a common confusion; Rs 250 wrongly adds the two.
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