The Two Parts of Every Option: Intrinsic vs. Extrinsic Value

When trading options, many beginners only look at the price — but real traders know that every option’s price is made up of two parts: intrinsic value and extrinsic value.

We broke it down in this lesson:

• Intrinsic value is what the option is worth right now
  
• Extrinsic value is what you pay for time and potential
  
• Selling options = collecting extrinsic
  
• Buying options = hoping extrinsic turns into intrinsic before time runs out
  

Master this and you’re ahead of 90% of traders.