The Intrinsic value reference article from the English Wikipedia on 24-Jul-2004 (provided by Fixed Reference: snapshots of Wikipedia from wikipedia.org)

Intrinsic value

Intrinsic value in general, is the argument that the value of a product is intrinsic within the product rather than dependent on the buyer's perception.

In Options terminology, an option has intrinsic value, if it is in-the-money. The intrinsic value is the positive difference between the current price for the underlying and the strike price of an option. For a call option the strike price has to be under the price of the underlying; for a put option the strike price has to be over the price of the underlying.

For example, if the strike price for a call option is USD 1 and the price of the underlying is USD 1.20, then the option has an intrinsic value of USD 0.20. Options are usually sold for their intrinsic value plus their time value. See Option time value.

See also

• Marginal theory of value
• Labor theory of value
• Options

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