Options
An option is said to have intrinsic value if the option is in-the-money. When out-of-the-money, its intrinsic value is zero
The intrinsic value for an in-the-money option is calculated as the absolute value of the difference between the current price (S) of the underlying and the strike price (K) of the option, floored to zero.
For a call option
while for a put option
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.
The total value of an option is the sum of its intrinsic value and its time value.
Read more about this topic: Intrinsic Value (finance)