How Is an Option's Intrinsic Value Calculated? ⎊ Path

How Is an Option’s Intrinsic Value Calculated?

The intrinsic value is the immediate profit that could be realized if the option were exercised immediately. For a call option, it is the greater of (Underlying Price – Strike Price) or zero.

For a put option, it is the greater of (Strike Price – Underlying Price) or zero. The option premium is the sum of intrinsic value and time value.

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Glossar

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.