Define ‘Intrinsic Value’ and ‘Time Value’ in the Context of an Option Price.
Intrinsic Value is the immediate profit if the option were exercised now. For a Call, it is the Stock Price minus the Strike Price (if positive).
Time Value (or Extrinsic Value) is the amount by which the option's premium exceeds its intrinsic value. It reflects the probability that the option will move further into the money before expiration.
