Extrinsic value calculator: the time value of an option
How much of that option's price is real value, and how much is just time? Type in the stock, the strike and the price. See the split, and whether early assignment is close.
How it works: an option's price has two parts. Intrinsic value is what it would be worth if you used it right now: stock price − strike for a call, strike − stock price for a put, and never below zero. Extrinsic value is everything else: option price − intrinsic value. It's the price of time and of what might still happen. It shrinks to zero by expiry. Out-of-the-money options are all extrinsic value.
The part an option seller gets to keep
When you sell an option, extrinsic value is the only part that can wear away in your favour. Intrinsic value moves with the stock, dollar for dollar. So a deep in-the-money covered call can look like big premium, but most of it is intrinsic: you're mostly being paid back for selling the shares below today's price. The extrinsic part is what you're really paid for the risk. In the wheel strategy, compare strikes by their extrinsic value, not their full price. See intrinsic vs extrinsic value for sellers.
Little extrinsic value left means early assignment
Most options are not used before expiry, because using one early throws its extrinsic value away. When there's almost none left, that reason disappears. For a short call, the big one is a dividend: if the extrinsic value is less than the dividend, the call's owner gains by using it the day before the ex-dividend date. They get your shares, and the dividend with them. A deep in-the-money put with almost no extrinsic value can be assigned early too. Check a dividend in the early assignment calculator, and read early assignment explained.
The Options Wheel System · for StructureX members
Learn the whole wheel, step by step. Use it for life.
44 plain-English modules take you from zero to running the wheel: covered calls, cash-secured puts, assignment, rolling, the math and the risk rules. A scored quiz after every part. Members of StructureX Foundations, my 50-lesson course, add it in one click, with the AI Research Desk.
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