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Intrinsic Value

Intrinsic value is the amount by which an option is currently in the money. For a call: Intrinsic Value = max(Underlying Price − Strike Price, 0) For a put: Intrinsic Value = max(Strike Price − Underlying Price, 0) Example AMZN = $280 $260 Call Intrinsic value: $280 − $260 = $20

Why it matters to you

Intrinsic value helps separate the portion of an option's premium coming from immediate exercise value from the portion coming from other factors.

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