Crypto Option Strikes, Moneyness, and Intrinsic Value
Summary
This guide defines an option strike as the fixed price at which the holder may buy or sell the underlying asset, and moneyness as the relationship between that strike and the current market price. It describes calls and puts as in, at, or out of the money depending on whether exercise would currently be favorable. Since crypto prices can move sharply, an option’s moneyness can change before expiration.
The document distinguishes intrinsic value, based on immediate exercise value, from extrinsic value, which reflects time remaining and expectations such as implied volatility. It connects strike selection to outlook, time horizon, and risk tolerance: in-the-money options cost more but contain intrinsic value, while out-of-the-money options are cheaper and more speculative. It also describes buying an at-the-money straddle or an out-of-the-money strangle to express a volatility view. Some explanations are incomplete, and one put-option example incorrectly labels the contract as a call; the guide is conceptual rather than a complete pricing framework.
Key ideas
- Moneyness compares an option’s strike with the underlying asset’s current price and can change as that price moves.
- In-the-money options have intrinsic value, while out-of-the-money options do not.
- Extrinsic value reflects time remaining and factors such as implied volatility.
- Strike selection depends on market outlook, time horizon, and tolerance for loss.
- Straddles use at-the-money call and put options, while strangles use out-of-the-money strikes to express a volatility view.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.