In looking at options trading information for vertical spreads,
an investor must take note of the fact that vertical spreads
have an intrinsic value. This options trading information
that a vertical spread can be considered to be in-the-money.
If a vertical spread has an intrinsic value then it can also
have an extrinsic value. The maximum extrinsic value in a spread
will deviate from spread to spread based on several factors.
This options trading information tells us that the maximum intrinsic
value will equal the exact difference between the strikes at
expiration as stated earlier. During a vertical spreads life,
its price will fluctuate between 0 and the value of the difference
between the two strikes. The price of the spread, at any given
time can be determined by the location of the stock and the
time until expiration. At expiration, of course, all that will
be left in terms of value for the two options will be the intrinsic
value of each. Thus, the value of the spread will be the difference
between each options intrinsic value at expiration.
The best options trading information will tell you that vertical
spreads have an intrinsic value, the term moneyness can be
applied to them. Moneyness refers to whether or not and by how
much an option, or a vertical spread, may be in-the-money or
out-of-the-money. This is a term used in options trading information
and mostly by floor traders, but is worth noting here.