Check out my entire playlist on Trading Options here: https://www.youtube.com/playlist?list=PLscTZuOqKWIxSZzy4ObKWDznEsCot_1HU Like, Comment, and Share my videos! 🔔 SUBSCRIBE HERE 🔔 http://bit.ly/BroeSubscribe 💯 LET’S CONNECT 💯 📷 Instagram @JakeBroe 👉 https://www.instagram.com/jakebroe/ 🐦 Twitter @Broe_Jake 👉 https://twitter.com/broe_jake 👇 👇 Watch My Other Videos Here 👇 👇 ★ How to Swing Trade Stocks (THE BASICS) https://youtu.be/o6MOQEzXwuM ★ My $25,000 Brokerage Account Challenge (2021) https://youtu.be/raTGjOhpQBI ★ How to Trade Options (Buying Call Options) https://youtu.be/-rvKtCGU25A You can support my channel by shopping on Amazon! Click the link below and then just buy anything you want! ► ► ► https://amzn.to/2UCE3uT 📷 📷 My YouTube Equipment 📷 📷 ► My Camera 👉 https://amzn.to/2UZpFwA ► My Wide-Angle Lens 👉 https://amzn.to/2Qwf3Sq ► My Wireless Microphone 👉 https://amzn.to/2QBV9W0 ► My Shotgun Microphone 👉 https://amzn.to/36bdLTv ► My Lighting 👉 https://amzn.to/2F5Ey7V ► My Light Diffusers 👉 https://amzn.to/2tjF8fG ► My GorillaPod 👉 https://amzn.to/2Q94aqI ► My Tripod 👉 https://amzn.to/37kBnVQ ► My SD Card 👉 https://amzn.to/36dP3Sy What flag is that? 👉 https://amzn.to/357sptp What is your background? 👉 https://amzn.to/2BCHRp1 ================ 📚 📚 Books That Changed My Life 📚 📚 📗 How to Win Friends & Influence People 👉 https://amzn.to/2F3ahGC 📕 Dumbing Us Down 👉 https://amzn.to/2spodrZ 📘 Quiet - The Power of Introverts 👉 https://amzn.to/36b2ti3 📙 The Red Queen 👉 https://amzn.to/2QzNW8W 📔 Rich Dad Poor Dad 👉 https://amzn.to/3bliFyP 📒 Why Nations Fail 👉 https://amzn.to/3fWZ3Em ================ What is Extrinsic Value? Extrinsic value measures the difference between the market price of an option, called the premium, and its intrinsic value. Extrinsic value is also the portion of the worth that has been assigned to an option by factors other than the underlying asset's price. The opposite of extrinsic value is intrinsic value, which is the inherent worth of an option. Basics of Extrinsic Value Extrinsic value, and intrinsic value, comprise the cost or premium of an option. Intrinsic value is the difference between the underlying security's price and the option's strike price when the option is in the money. For example, if a call option has a strike price of $20, and the underlying stock is trading at $22, that option has $2 of intrinsic value. The actual option may trade at $2.50, so the extra $0.50 is extrinsic value. If a call option has value when the underlying security's price is trading below the strike price, the option's premium only stems from extrinsic value. Conversely, if a put option has value when the underlying security's price is trading above the strike price, the option's premium is only comprised of its extrinsic value. Factors Affecting Extrinsic Value Extrinsic value is also known as "time value" because the time left until the option contract expires is one of the primary factors affecting the option premium. Under normal circumstances, a contract loses value as it approaches its expiration date because there is less time for the underlying security to move favorably. For example, an option with one month to expiration that is out of the money will have more extrinsic value than that of an out of the money option with one week to expiration. Another factor that affects extrinsic value is implied volatility. Implied volatility measures the amount an underlying asset may move over a specified period. If the implied volatility increases, the extrinsic value will increase. For example, if an investor purchases a call option with an annualized implied volatility of 20% and the implied volatility increases to 30% the following day, the extrinsic value would increase. ================ #OptionsTrading #BuyingOptions #PutOptions ================ DISCLAIMER: This video is for entertainment purposes only. I am not a legal or financial expert or have any authority to give legal or financial advice. While all the information in this video is believed to be accurate at the time of its recording, realize this channel and its author makes no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors appearing in this video. ADVERTISER DISCLOSURE: Jake is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to www.amazon.com. Additionally, other referral links are included and this channel does receive compensation for sending traffic to partner sites. Shopping through our links is an easy way to support the channel and we appreciate and are super grateful for your support!