GlossaryIntermediate
Intrinsic Value (Options)
The portion of an option's value that comes from it already being profitable to exercise, ignoring any remaining time until expiry.
An option's intrinsic value is the portion of its value that comes purely from the relationship between the current asset price and the option's strike price — specifically, how much profit it would produce if exercised immediately, with zero remaining time until expiry.
An option with no current intrinsic value (its strike price isn't currently profitable to exercise) can still have real market value entirely from time value — the possibility that it becomes profitable before expiry. See Kaavon's "Time Value (Options)" glossary definition and the Options Payoff calculator for the full relationship.
Examples
- A call option with a strike price below the current spot price has positive intrinsic value, since exercising it immediately would be profitable.
- An option's total market price is generally the sum of its intrinsic value and its time value, not intrinsic value alone.