Intrinsic Value
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Definition of 'Intrinsic Value'
In options trading, the intrinsic value of an option is the difference between the current trading price and the strike price of the option. Only in the money options will have an intrinsic value.
For example, a call option with a strike price of $45 will have an intrinsic value of $3 if the underlying security is trading at $48. Likewise, a put option with a strike price of $45 will have an intrinsic value of $4 if the underlying security is trading at $41.
Intrinsic Value is one of two components of an option's premium (price). The other component is Time Value.
For example, a call option with a strike price of $45 will have an intrinsic value of $3 if the underlying security is trading at $48. Likewise, a put option with a strike price of $45 will have an intrinsic value of $4 if the underlying security is trading at $41.
Intrinsic Value is one of two components of an option's premium (price). The other component is Time Value.
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