Intrinsic Value

Understanding Intrinsic Value in Options

Intrinsic value is the difference between the spot price and the strike price of an option, representing its inherent worth.

Example:

  • BankNifty Spot: 42000
  • BankNifty 40000CE: Intrinsic Value is 2000 (42000 - 40000)

Options with Intrinsic Value:

  • Only In The Money (ITM) options have intrinsic value.
  • At The Money (ATM) and Out of The Money (OTM) options do not have intrinsic value.

Intrinsic Value Check in Rocket Plus:

  • Applicable Options:
    • Strikes more than 7% ITM will be checked.
    • Orders beyond 20% of intrinsic value will be rejected.
  • Close to The Money Options: Not subject to intrinsic value checks due to high volatility.

Example:

  • Bank Nifty Spot:40000
    • 37200 CE (Intrinsic Value: 2800): Orders < 2240 or > 3360 rejected.
    • 42800 PE (Intrinsic Value: 2800): Orders < 2240 or > 3360 rejected.

Intrinsic Value Check in Navia Trading Platform:

  • Applicable Options:
    • Strikes with positive intrinsic value are checked.
    • Orders beyond 5% of intrinsic value will be rejected.

Example:

  • Bank Nifty Spot:40000
    • 39900 CE (Intrinsic Value: 100): Orders < 95 rejected.
    • 40100 PE (Intrinsic Value: 100): Orders < 95 rejected.


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