Define “Intrinsic Value” of an Option.
The intrinsic value of an option is the immediate profit that could be realized if the option were exercised right now. It is the difference between the underlying asset's current price and the option's strike price, but only if this difference is positive.
For a call option, it is Current Price minus Strike Price. For a put option, it is Strike Price minus Current Price.
If the difference is zero or negative, the intrinsic value is zero.
Glossar
Intrinsic Value of an Option
Valuation ⎊ Intrinsic value of an option, within cryptocurrency derivatives, represents the immediate profit obtainable through exercising the option given the underlying asset’s current market price.
Intrinsic Value
Valuation ⎊ This represents the in-the-money amount of an option, calculated as the difference between the spot price and the strike price, if positive, otherwise zero.
Strike Price
Reference ⎊ The Strike Price is the predetermined reference level set at the contract's inception against which the underlying crypto asset's spot price is compared at expiration or exercise.
Current Price
Valuation ⎊ Current price in cryptocurrency, options, and derivatives markets represents the prevailing consensus of market participants regarding an asset’s worth at a specific point in time, reflecting supply and demand dynamics alongside perceived future cash flows or utility.