Derivatives  Option Prices and the Time to Expiration
The price of an option has two components, the intrinsic value and the time value. The intrinsic value of an option is the difference between the actual price of the underlying security and the strike price of the option. The time value is determined by the remaining lifespan of the option, the volatility and the cost of refinancing the underlying asset (interest rates). For example:
Option  Strike  Option Premium  Stock  Intrinsic Value  Time Value 
Call  5  $5  $36  $2  $3 
Put  68  $4  $70  $2  $2 
Call  30  $2  $30  $0  $2 
Put  100  $6  $101  $1  $5 
Longerterm calls, both American and European, typically have more value than shortterm calls because there is more time to have an event that can occur to make them go in the money. In addition, they can be worth no less than their shortterm cohorts. The same is true concerning American puts. However, European puts can only be exercised on the maturity date. If the put were to go into the money, one could exercise that option and receive the funds before the maturity date  that money could then be invested in another asset. Consequently, with the European put an investor has to wait to receive the funds and loses those extra days to earn additional income.
PutCall Parity
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Compound Option
An option for which the underlying is another option. Therefore, ... 
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An option that can be exercised anytime during its life. American ... 
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A situation where an option's strike price is identical to the ... 
European Option
An option that can only be exercised at the end of its life, ...

How do I change my strike price once the trade has been placed already?
Learn how the strike prices for call and put options work, and understand how different types of options can be exercised ... Read Answer >> 
What role does intrinsic value play in put options?
See why the concept of intrinsic value is so important in options trading and how investors use it to evaluate the worth ... Read Answer >> 
What happens when a security reaches its strike price?
Learn more about the moneyness of stock options and what happens when the underlying security's price reaches the option ... Read Answer >> 
When is a call option considered to be "in the money"?
Learn about call options, their intrinsic values and why a call option is in the money when the underlying stock price is ... Read Answer >> 
When is a put option considered to be "in the money"?
Learn about put options, what they are, how these financial derivatives operate and when put options are considered to be ... Read Answer >> 
How are call options priced?
Learn how aspects of an underlying security such as stock price and potential for fluctuations in that price, affect the ... Read Answer >>