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StockCram is not a broker-dealer, investment adviser, or financial institution. All content is for educational and informational purposes only and should not be construed as personalized investment advice. Consult a qualified financial professional before making investment decisions. Past performance does not guarantee future results.Simple Definition
The real, exercisable value of an option. The amount it is in-the-money.
Why It Matters
Intrinsic value is the guaranteed minimum an option is worth if exercised now. A $100 call with the stock at $115 has $15 intrinsic value - that's real money you could capture by exercising. Options can never trade below intrinsic value (arbitrage would correct it instantly).
Key Points
- For calls: Intrinsic Value = Stock Price - Strike Price (if positive, else 0)
- For puts: Intrinsic Value = Strike Price - Stock Price (if positive, else 0)
- OTM options have zero intrinsic value - all their price is time value
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Common Questions
The real, exercisable value of an option. The amount it is in-the-money. Intrinsic value is the guaranteed minimum an option is worth if exercised now. A $100 call with the stock at $115 has $15 intrinsic value - that's real money you could capture by exercising.
Intrinsic value is the guaranteed minimum an option is worth if exercised now. A $100 call with the stock at $115 has $15 intrinsic value - that's real money you could capture by exercising. Options can never trade below intrinsic value (arbitrage would correct it instantly).
For calls: Intrinsic Value = Stock Price - Strike Price (if positive, else 0)
For puts: Intrinsic Value = Strike Price - Stock Price (if positive, else 0)
OTM options have zero intrinsic value - all their price is time value