Options Pricing
What is Intrinsic Value?
The real, tangible value of an in-the-money option.
📖 Complete Definition
Intrinsic value is the amount an option would be worth if exercised immediately. For calls: stock price minus strike price (if positive). For puts: strike price minus stock price (if positive). Only in-the-money options have intrinsic value. Out-of-the-money options have zero intrinsic value.
📐 Formula
Call Intrinsic Value = max(0, Stock Price - Strike Price) Put Intrinsic Value = max(0, Strike Price - Stock Price)
💡 Examples
- →$100 call with stock at $108 has $8 intrinsic value
- →$100 put with stock at $95 has $5 intrinsic value
❓ Frequently Asked Questions
Why does intrinsic value matter?
Intrinsic value is guaranteed - it doesn't decay over time. When evaluating options, understanding how much is intrinsic vs extrinsic helps assess time decay risk.
🔗 Related Terms
Put Your Knowledge to Practice
Use our free options tools to analyze trades, calculate Greeks, and visualize profit/loss scenarios.