Intrinsic Value
Intrinsic value, in derivatives, is the immediate payoff an option would produce if exercised today; for a call, intrinsic value = max(0, S − K); for a put, intrinsic value = max(0, K − S).
Example: A call option on a stock trading at $52 with a strike of $50 has an intrinsic value of $2; if the option's price (premium) is $4, the remaining $2 is time value.
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