Since the option is out of the money, it has no intrinsic value. Getty Images. Both call and put options can be In the Money or Out of the Money.
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The strike price is the price at which an option buyer can sell the underlying asset. A call option is bought if the trader expects the price of the underlying to rise within a certain time frame. Out of the money indicates underlying asset price is below the call strike price. When prices diverge, as is the case with arbitrage opportunities, the selling pressure in the higher-priced market drives price down. Options expirations vary and can have short-term or long-term expiries.
Options Pricing: Put/Call Parity
But the main reason is that Ca,l market participants generally prevent these opportunities from existing in the first place. Stoll in his Dec. For these rights, the call buyer pays a "premium. Your option is no longer in the money, so it has no intrinsic value. At the same time, the buying pressure in the lower-priced market drives price up.
Two components of an option's price
Call option generates money when optin of the underlying asset is rising upwards whereas Put option will extract money when value of Calp is falling. It is only worthwhile for the put buyer to exercise their option, and force the put seller to give them the stock at the strike price if the current price of the underlying is below the strike price. Out of the Money means the underlying asset price is below the call strike price. The buying and selling pressure in the two markets quickly bring prices back together i.