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Intrinsic Value




This is a measure of any real value to the option. The amount by which an option is in-the-money. Out-of-the-money options have no intrinsic value.  

For example if XYZ is trading at $67 on the stock exchange a $60 call will be worth at least $7 because it conveys the right to buy shares for $7 less than they are currently worth. Similarly a $65 call will be worth at least $2.


Additional Comments:

To calculate the intrinsic value of a call option, take the price of the underlying and subtract the strike price. A put option's intrinsic value equals the strike price minus the price of the underlying.

Call Intrinsic value = underlying - strike price.
Put Intrinsic value = strike price - underlying.

Related Terms:

Out of the Money
Refers to an options contract that has no intrinsic value; for instance, a call option whose ...

Time value
The amount by which the current market price of an option exceeds its intrinsic value. The intrinsic ...

In the Money
(ITM) If you were to exercise an option and it would generate a profit at the ...





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