What Is ‘Intrinsic Value’ in an Options Contract?
Intrinsic value is the immediate profit a trader would realize 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 that difference is favorable to the holder.
For a call option, it is the greater of (Current Price – Strike Price) or zero. For a put option, it is the greater of (Strike Price – Current Price) or zero.
An option has intrinsic value only when it is 'in-the-money'.
Glossar
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.
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.