Intrinsic value is the part of an option’s price that’s real right now — the value it would have if you exercised it this instant.
NoVo Options Trading ·
Intrinsic value is the portion of an option’s price that comes from being in the money — the real, exercisable value. It’s one of the two components of every premium.
How it works
For a call, intrinsic value = price minus strike (if positive). A $600 call with SPY at $605 has $5 of intrinsic value. An out-of-the-money option has zero intrinsic value — it’s all extrinsic (time) value. Intrinsic value is what the option is worth if exercised right now.
Why it matters
Intrinsic value is the “solid” part of the premium — it doesn’t decay (only the extrinsic part does). At expiration, an option is worth only its intrinsic value (extrinsic goes to zero), which is why an OTM option expires worthless and an ITM one retains its intrinsic amount.
Intrinsic value is the real, in-the-money part of the price — the piece that survives to expiration. Everything else is time.
The takeaway
Premium = intrinsic + extrinsic value. Intrinsic is the exercisable, decay-proof part; extrinsic is the time-and-volatility part that erodes. Understanding the split explains why options lose value even when the underlying doesn’t move (the extrinsic part decays).
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