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How do you find out how much a put contract would cost?


The premium for a 99.00 Eurodollar futures put option is 0.55 and the spot price is 98.51

So I have the intrinsic value which is $1225, but I am not sure how to compute the time value and how much that put contract would cost. Still trying to understand options.


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Skipping your example, for a European put option on a future contract you can apply the formula known as Black -76. For American or Bermudan options on futures this Black -76 is also adequate because if you exercise early than you would stand with the future which is delivered at expiry anyway - of course the difference is that it might be easier to sell the future..

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Yea i got it now. I know you could use black-scholes, but i was just using a simple equation where Call option = Intrinsic Value - Time value. But i got it know. For some reason my calculation kept coming out wrong, probably a 0 or something, but when i walked away and tried it later i got it. shrugs Thanks though. – Matt Dec 4 '10 at 21:53
The formula known as Black and Scholes is not the same as Black -76. Basically BS is for European stock options while B76 is for future contracts (also known as bond options). – AD. Dec 5 '10 at 5:33

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