What Is the Relationship between ‘Moneyness’ and Intrinsic Value?

Moneyness describes the relationship between the underlying asset's price and the option's strike price. The three states of moneyness are In-the-Money (ITM), At-the-Money (ATM), and Out-of-the-Money (OTM).

Intrinsic value is directly present only when an option is ITM. An option that is ATM or OTM has zero intrinsic value.

Therefore, intrinsic value is a component of an option's price only when its moneyness is ITM.