How Does the Concept of “Intrinsic Value” Relate to the Margin Calculation for an Option?

Intrinsic value is the portion of an option's price that is already in-the-money. For short options, the margin calculation considers the intrinsic value because it represents the immediate liability of the seller if the option were exercised.

A higher intrinsic value means a greater immediate risk, which typically results in a higher margin requirement to cover that liability.