Intrinsic Value

Intrinsic value is the amount by which an option is in the money. For a call option, it equals the underlying price minus the strike price (if positive); for a put option, it equals the strike price minus the underlying price (if positive). Out-of-the-money and at-the-money options have zero intrinsic value. Intrinsic value, together with time value, makes up an option’s total premium.