Just as stock prices contain an element of net asset worth and also prospective growth, options carry with them two components within their premium; intrinsic value and extrinsic value. Intrinsic value will reflect the absolute unrealized value of the option, whereas extrinsic value will reflect the possibilities held by the future. Options however, are derived from the underlying asset, which in this case is the stock. Here, the direction of the underlying, regardless of the source of its influence will dictate the value and activity of the option market. In a simplified sense, if the underlying stock is rising, call options on the stock will increase in value, while put options will decrease. If the stock is falling, put options will increase in value but call option will devalue.

Still, the fact that options are a synthetic instrument imbued with a predetermined lifetime carries with it the notion of probability. The presence of probability means that chance and risk are involved in the pricing of options, that have an existence governed by strictly predetermine conditions, whereas the underlying stock is tangible, physical and in existence as an asset available to all in the present and indefinitely into the future; it is ownership in the corporation.

While options are reliant on the movement of the underlying asset, which itself is susceptible to a large number of macroeconomic and microeconomic influences, the element of probability can only be confined to a mathematical jurisdiction. Expressions of possibilities and probabilities in the mathematical world are accomplished through a volatility variable. It is volatility; the predisposition to reflect the momentum of the past into the future, that will largely dictate the premium above its intrinsic value. This premium above absolute value is found to be very similar to the transformation that a stock price will undergo when investors consider it will experience growth into the future. As mentioned above, these stocks will experience a capital gain far beyond their present asset values; moreover, their prices will reflect the present value of future profits.

Options are the right but not the obligation to either purchase or sell the underlying stock, whereas the stock is an asset in the very hands of the investor that may be retained or sold in the market place. With stock ownership too, certain rights are enjoyed by the owner, and also certain obligations, but rarely are they both connected to the investment; a shareholder has not the freedom to waive ownership by default, for the shares must be actively sold to another individual. Options will however, simply expire in the fullness of time. In some instances they will be automatically exercised if expiring in-the-money, or with an intrinsic value. In these instances the option will provide income to the holder if a marked-to-market settlement is used, but in the event of cash settlement, an exercise will result in an ongoing responsibility being imposed upon the parties. If the option held was a call, the seller will assign the underlying asset to the holder at the strike price, who will then own full title of it. If a put was exercised, it will be the holder that needs to assign the underlying, at the strike price. Here, the option position has metamorphisized into that of the underlying.