Intrinsic value

The amount an option is in the money, the value if exercised right now.

OptionsIntermediate

Definition

For a call it is the stock price minus the strike, if positive. For a put it is the strike minus the stock price, if positive. An option's premium is its intrinsic value plus its extrinsic, or time, value.

Formula

Premium = intrinsic value + extrinsic value

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