In option chains and financial market feeds, Latest Traded Price (LTP) represents the exact price per unit at which the most recent transaction of an option contract occurred on the exchange.
Anatomy of Option Premium (LTP)
An option's LTP consists of two distinct financial components:
Option Premium (LTP) = Intrinsic Value + Extrinsic (Time) Value
1. Intrinsic Value
The real financial value an option would have if exercised immediately. Out-Of-The-Money (OTM) options have zero intrinsic value.
2. Extrinsic (Time & Volatility) Value
The additional premium buyers are willing to pay for time remaining until expiration and anticipated market volatility (IV). Time value decays continuously (Theta decay) as expiration approaches.
Bid/Ask Spreads and LTP Execution
The LTP displays the price of the last execution, but liquid markets continuously update Bid (highest price buyers will offer) and Ask (lowest price sellers will accept) quotes around the LTP.
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