Definition of Intrinsic Value

Intrinsic Value is the amount by which an option is in the money.

Applying "Intrinsic Value" to Securities Exams:

An option’s premium is made of intrinsic value and time value. The option’s time value is the amount by which the option’s premium exceeds its intrinsic value. Calls have intrinsic value when the underlying stock price is greater than the option’s exercise price. Puts have intrinsic value when the underlying stock price is lower than the put’s exercise price.

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