Call and Put Option Trading: What is the Intrinsic Value ?

The intrinsic value of an option trading is defined as the amount, by which an option is in - the-money, or / the immediate exercise value of the option when the underlying position is marked - to - market. (mtm)

For a call option..

Intrinsic Value = Spot Price - Strike Price

For a put option..

Intrinsic Value = Strike Price - Spot Price

The intrinsic value of an option must be a positive number or / 0. It can not be negative.

For a call option, the strike price must be less than the price of the underlying asset for the call to have an intrinsic value greater than 0.

For a put option, the strike price must be greater than the underlying asset price for it to have intrinsic value.

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