Home
Back
Option Pricing Formulas:
| From: | To: |
The intrinsic value of an option is the value that would be received if the option were exercised based on current market prices. For calls, it's the difference between the underlying price and strike price (if positive). For puts, it's the difference between strike price and underlying price (if positive).
The calculator uses these simple formulas:
Where:
Explanation: The intrinsic value represents the immediate exercise value of the option. If the calculation results in a negative number, the intrinsic value is zero since options cannot have negative value.
Details: Intrinsic value is a key component of an option's total value (along with time value). It helps traders determine whether an option is in-the-money, at-the-money, or out-of-the-money.
Tips: Enter the current price of the underlying asset and the option's strike price in USD. Select whether you're calculating for a call or put option. All values must be positive numbers.
Q1: What's the difference between intrinsic value and time value?
A: Intrinsic value is the immediate exercise value, while time value represents the potential for the option to gain additional intrinsic value before expiration.
Q2: Can an option have intrinsic value but no time value?
A: Yes, deep in-the-money options close to expiration may have little to no time value remaining.
Q3: What does it mean when intrinsic value is zero?
A: The option is either at-the-money or out-of-the-money, meaning exercising it would not be profitable.
Q4: How does intrinsic value change with the underlying price?
A: For calls, intrinsic value increases as the underlying price rises above the strike. For puts, intrinsic value increases as the underlying price falls below the strike.
Q5: Is intrinsic value the same as profit?
A: No, intrinsic value doesn't account for the premium paid for the option. Profit would be intrinsic value minus the premium paid.