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.