Option contracts, in general, give the holder the right (but not the obligation) to buy or sell a certain underlying asset.
You might have the option to buy 100 shares of NFLX at $400, expiring in June. Or you might have the option to sell 100 barrels of oil at $70, expiring in July.
An index option applies this concept to an index, rather than an individual stock or other asset. So...you might acquire an option to buy the value of the S&P 500.
These contracts allow investors to bet on general market movements (letting the S&P 500 stand in for the overall stock market, for instance) or target particular segments of the market, as tracked by other indexes. They also provide a way to hedge risk elsewhere in an investor's portfolio.
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Finance: What is Intrinsic Value (of An ...6 Views
Finance allah shmoop what is the intrinsic value of an
option All right this is brandi She owns a twelve
dollars strike price call option toe buy a share of
my fifteen minutes are up dot com a retirement home
chain for reality tv stars who recently gained self awareness
Well the stock is trading for fifteen bucks a share
of this moment Her strike price is twelve so the
intrinsic value of that option is fifteen minutes twelve or
three bucks that is it is three dollars in the
money and if brandy converted it into a share this
moment and then immediately sold the stock for fifteen dollars
in cash well she'd make three bucks But there's a
catch per call option doesn't expire for five weeks so
that three dollars in the money is actually worth more
than three dollars because she has data or time yet
to exercise and convert or just sell the option itself
So it's worth mohr because well a stock might go
up from fifteen dollars in overtime Stocks go up so
in the next five weeks well couldn't go up a
dime twenty cents twenty five cents and make that three
Dollars worth three ten three twenty three Twenty five Sure
sure it could happen So yeah that's The difference between
actual value and intrinsic value You get seita kickers in
there making the option's worth more than just converting them
into stock and selling them right there And yeah it
looks like our one and a half minutes are up
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