Option Intrinsic Value
The value an option would have if exercised immediately, which is never less than zero.
Formula
Call Intrinsic Value = max(Spot - Strike, 0); Put Intrinsic Value = max(Strike - Spot, 0)
Unit
₹
In depth
Intrinsic value is the floor under an option's price, because no rational holder would sell for less than the amount immediately realisable by exercising. It is a different concept entirely from the intrinsic value of a business, which is an estimate of worth from future cash flows — the shared name is a genuine source of confusion between two categories of analysis. Intrinsic value cannot be negative, since an option that would lose money on exercise is simply left unexercised. The premium above intrinsic value is time value, and at expiry an option is worth its intrinsic value exactly.
Worked example
A 24,000 call with the index at 24,200 has intrinsic value of 200. If it trades at 260, the remaining 60 is time value. At expiry with the index unchanged, it is worth exactly 200 and the 60 has gone.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Option Intrinsic Value” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.