You can split the total price of an option into intrinsic and extrinsic value (the latter is also called the time value). Intrinsic value is how much you would gain or lose if the option expires while the base contract is at its current price level (i.e., if base price doesn't move at all).
For out of the money options the intrinsic value is zero. Under any circumstances, it is never less than zero and can be calculated as MAX(strike price - base price, 0) for put options and MAX(base price - strike price, 0) for call options. At the expiry, the value of an option is equal to its intrinsic value. In this study the simulation date is set to the expiry, so you can observe how the intrinsic value of an option changes with the base price.
Want to learn more? Download now an interactive reference application for iPhone.
The screenshot shows the following portfolio:
European put struck at 10.000 with expiry in 30 days
This is an excerpt from iOptioneer option trading reference application. In order to build the real-time dynamic strategy graph and run simulations you will need to download the application from App Store.