What is intrinsic value of the option? How to calculate intrinsic value of an option?

asked Tuesday, April 10, 2018

Intrinsic value of an Option is the amount by which the strike price of an option is in-the-money. It is also considered as the value of an Option if it were exercised today.

For Call option

Intrinsic value = Current price of underlying - Strike Price

For Put Option

Intrinsic value = Strike Price - Current price of underlying

For example, you hold a Reliance Call Option at 900 and the current price of the stock is 920 then the intrinsic value of your Option will be:

920-900= Rs 20

Please note that the Intrinsic value of an underlying can either be positive or zero. It cannot be negative.

answered Tuesday, April 10, 2018

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