Why american deep ITM call has time value?

M

maxima120

I don't get this at all..
Why american deep ITM call has time value?

Suppose you have an underlying which does not pay divs. and it trades at 100 and you buy 80 call (american).. why should the call price be any different from $20 exactly?

where this time value comes from?

what the buyer incentive to pay that markup?

I understand the delta of such call is 100.. so it must be the same as buying the underlying. but you don't pay 101 for the underlying which cost 100. why would you pay 21 for deep in the money American option?
 
I also have a question regarding DITM options say 6 weeks out. It seems that
even with the 200 or so highest average volume options, next months DITM volume
is low, say maybe 50 puts traded per day on average.
I understand the spread can be poor due to the low liquidity but can you lmit buy or sell at the bid /ask and expect a fill , or can the market maker see your order and set
the bid/ask a nickel or so further away. Essentially just you and the market maker.
Does this happen or do they let you out a the initial bid/ask?
Thanks.
 
interest cost and spread =>> which is the put value in reality not theory.

If you buy the underlying at 100, it costs more money to fund this that something that cost only 20. (wait until interest rates rise again)
Plus why would you expect anyone to sell you this without taking something for their risk?
Even if the put is worth zero theoretically, why would anyone else sell it for zero.
 
Maverick74 said:
Google put to call parity. Then google the phrase "no arbitrage principle" for option pricing.
More...
i said american call put are not at parity. And you said google parity...

You are so desperate to spit at someones shoes that you couldnt see it were your own shoes.

Keep your verbal vomit inside your mouth mate
 
eurusdzn said:
I also have a question regarding DITM options say 6 weeks out. It seems that
even with the 200 or so highest average volume options, next months DITM volume
is low, say maybe 50 puts traded per day on average.
I understand the spread can be poor due to the low liquidity but can you lmit buy or sell at the bid /ask and expect a fill , or can the market maker see your order and set
the bid/ask a nickel or so further away. Essentially just you and the market maker.
Does this happen or do they let you out a the initial bid/ask?
Thanks.
More...

just use the equivalent otm option and sell/buy shares, same as itm and dont have to worry about b/a spreads.
 
maxima120 said:
where this time value comes from?
More...

From Time. Days till expiration, How much can the underlying move in that time.

Forget all the other gobbley goop...........as long as there's time...there will be time value....end of story.
 
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