How do you find out how much a put contract would cost?
Example:
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.
Thanks.
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..