Intrinsic Value vs Time Value for Options on Pluang

Every option premium on Pluang is made up of two components: intrinsic value and time value. Intrinsic value is what the option would be worth if exercised right now — for a call, the underlying's current price minus the strike price; for a put, the strike price minus the current price — and it is zero whenever that result isn't positive. Time value is whatever remains of the premium after subtracting intrinsic value, calculated as Premium minus Intrinsic Value. It represents how the market prices the remaining time and uncertainty before expiry: more time left and higher implied volatility both push time value up. Because Pluang's options are American-style, an in-the-money short position can be assigned at any point before expiry rather than only on the expiry date, which makes tracking these two components a risk question, not just a pricing one. Time value decays daily through theta and erodes fastest as expiry nears, while intrinsic value only changes when the underlying's price moves relative to the strike.

• Intrinsic value — the option's "right now" value. For a call, intrinsic value = current underlying price − strike price (if positive; otherwise zero). For a put, intrinsic value = strike price − current underlying price (if positive; otherwise zero). An option with intrinsic value is in the money (ITM); at-the-money (ATM) and out-of-the-money (OTM) options have zero intrinsic value.

• Time value — the uncertainty premium. Time value = Premium − Intrinsic Value. It reflects the probability that the option could still gain value before expiry, driven mainly by time remaining and implied volatility. Even a deeply in-the-money option carries some time value until close to its last trading moment.

• Time value decay is not linear. This erosion is called theta decay (theta is one of the options Greeks). With months left, an option loses only a small slice of time value per day; in the final week before expiry on Pluang, decay accelerates sharply. Holding a position through this window with no meaningful move in the underlying can quietly erase most of the remaining premium.

• Assignment risk is tied to intrinsic value, not just expiry. Because Pluang's options are American-style, a short position that is in the money can be assigned by the counterparty on any trading day before expiry, not only when the contract expires. Monitoring how much intrinsic value a short position carries matters throughout the contract's life, not just in its final days.

• At expiry, only intrinsic value is left — and Pluang closes the position for you. Time value falls to zero on the expiry date. Rather than leaving an open position to settle passively at a final reference price, Pluang force-closes any option still open roughly one hour before market close on expiry day, based on the intrinsic value at that point.

Related questions:

Q: Can an option on Pluang have intrinsic value but still expire worthless?
No — an option with positive intrinsic value at expiry finishes in the money and is settled based on that value; it can only expire worthless if intrinsic value is exactly zero at that point. Because Pluang's options are American-style, an in-the-money short position can also be assigned before expiry ever arrives, so the exercise outcome doesn't always wait until the final trading moment.

Q: Does time value increase or decrease when implied volatility rises on Pluang?
It increases. Higher implied volatility widens the range of prices the underlying could realistically reach before expiry, so the market prices in more time value for that strike and expiry. This is why two options with identical intrinsic value can trade at different premiums if the market expects one underlying to move more than the other, and it's also why time value can shift quickly around major news even before the underlying price moves.

Q: Why does time value decay faster as expiry gets closer?
Time decay, measured by theta, is not linear — it accelerates the closer an option gets to its expiry date. With months remaining, an option loses only a small fraction of its time value each day; in the final week, that erosion speeds up sharply as less time remains for the underlying to move in the position's favor. This is why holding an option through its last days without a strong directional move can quietly erase most of its remaining value.

Q: Does Pluang settle options automatically at expiry with no action needed?
No — Pluang force-closes any open option position roughly one hour before market close on expiry day rather than letting it run to a passive settlement. By that point time value has effectively fallen to zero, so the force-close reflects mainly the option's intrinsic value. Because Pluang's options are American-style, in-the-money short positions can also be assigned earlier than expiry day itself, so this isn't the only point in the contract's life where exercise can occur.