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Extrinsic Value

prices are made up of two components:
and extrinsic value. Extrinsic value can be thought of as the value of risk with respect to time. With more
and time until
comes more extrinsic value priced into the options. To calculate the extrinsic value of an
option, simply subtract the intrinsic value from the option price.
options are purely extrinsic value.

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