Paul, Good that you are asking but because you are asking I can tell that you really need to sit down and get yourself some good study materials and read up on this. Extrinsic Value is often referred to as time value. The major component being volatility and this is basically what makes an option an option. Intrinsic Value is the amount of money an Option is "In the Money", if its "In the Money" then it has real value not just time value. The more in the money an option contract becomes the more it ceases being an option and the more it starts acting like the stock itself. Out of the money Options have only extrinsic value. At the money Puts and Calls have the most extrinsic value. But all these topics are significantly more complex than just what I have described here or can post in a newsforum. My suggestion is for you to get yourself a good book on basic Options Theory and study these topics thoroughly because if you are interested in options you have to understand these fundamental relationships. Because if you don't learn this then you have no business even attempting to trade options its a sure fire way to get yourself killed. Sorry to be so blunt but its just a fact. This is basic stuff and you have to know it. A good book that is good for beginners is The Rookies Guide to Options Trading by Mark Wolfinger although there are a number of other good primers on options out there that others here in the forum might suggest Cheers Scott --- On Wed, 2/10/10, paul7313 <paul7313@yahoo.
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