Options Values: Premium, Intrinsic Value, and Time Value

What this video covers

• Why premium always equals intrinsic value plus time value, and what each component actually represents
• How to calculate intrinsic value for calls (market price minus strike price) and puts (strike price minus market price) without mixing up the formulas
• Why intrinsic value can never be negative, and why a negative formula result means the answer is zero because the option is out of the money
• How time value behaves: highest at the money, eroding through theta, and zero at expiration
• Why an out-of-the-money option still commands a premium, and why that entire premium is pure time value
• The call up, put down shorthand for moneyness, and how the same logic extends to breakeven calculations