zpostcode
intrinsic value
Apr 26, 2025 12:05 AM

  In finance, intrinsic value is a measure of the true worth, in dollar terms, of an asset or company based on an accurate assessment of fundamental values. For a company, intrinsic value, as estimated by professional stock analysts, would be the sum of all tangible and intangible assets if converted to cash. Some value investors seek companies whose market capitalization is lower than their intrinsic value.

  In option markets, intrinsic value has an entirely different meaning. An option’s price is made up of two components: intrinsic value—the amount by which an option is in the money—and extrinsic value (or “time value”), which is based on the amount of expected variability in the underlying security between now and the option’s expiration.

  For example, if stock XYZ is trading for $60 per share, and a call option at the 55-strike is trading for $6.25, that option would have $5 of intrinsic value (because the stock is trading exactly $5 above the strike price) and $1.25 of extrinsic value.

  Doug Ashburn

Comments
Welcome to zpostcode comments! Please keep conversations courteous and on-topic. To fosterproductive and respectful conversations, you may see comments from our Community Managers.
Sign up to post
Sort by
Show More Comments
Information Recommendation
Google Gemini
  Google Gemini generative AI Actions Share Share Share to social media Facebook X URL https://www.britannica.com/technology/Google-Gemini Share Share Share to social media Facebook X URL https://www.britannica.com/technology/Google-Gemini Also known as: Google Bard Written by Frannie Comstock Frannie Comstock is a writer based in Chicago. Frannie Comstock Fact-checked by The Editors of Encyclopaedia Britannica Encyclopaedia Britannica's editors oversee subject areas in which they...
The Tête à Tête
  The Tête à Tête painting by William Hogarth Actions Share Share Share to social media Facebook X URL https://www.britannica.com/topic/The-Tete-a-Tete Share Share Share to social media Facebook X URL https://www.britannica.com/topic/The-Tete-a-Tete Also known as: “Marriage A-la-Mode: 2, The Tête à Tête”, “Shortly After the Marriage” Written by Ana Finel Honigman Ana Finel Honigman is a New York- and London-based critic, curator, and...
Consumer staples sector: Investing in stocks that provide the basics for living
     Some things you just can’t live without. Consumer staples are products that are essential or that you’re likely to purchase regardless of your personal finances or how the economy is performing. Food, drinks (including alcoholic beverages), tobacco, and household and personal care items are all considered consumer staples.   The sector comprises a broad swath of companies that make, market,...
Industrials sector: Investing in big companies that do big things
     When envisioning the pillars of American industry, numerous products and services come to mind: heavy machinery for transportation, farming, and defense; building products, electrical equipment, and machine parts; and an array of functions, from supply chain consulting to basic facility services, like plumbing and janitorial duties.   What is the industrials sector?The industrials sector comprises companies that produce capital goods—products...
Anne Lamott
  Anne Lamott American author Actions Share Share Share to social media Facebook X URL https://www.britannica.com/biography/Anne-Lamott Share Share Share to social media Facebook X URL https://www.britannica.com/biography/Anne-Lamott Written by Laura Payne Laura Payne is a freelance writer whose work covers many topics. She is a former Wayne State University linguistics instructor. Laura Payne Fact-checked by The Editors of Encyclopaedia Britannica Encyclopaedia Britannica's...
Ted Koppel
  Ted Koppel American journalist and news broadcaster Actions Share Share Share to social media Facebook X URL https://www.britannica.com/biography/Ted-Koppel Share Share Share to social media Facebook X URL https://www.britannica.com/biography/Ted-Koppel Also known as: Edward James Martin Koppel Written and fact-checked by The Editors of Encyclopaedia Britannica Encyclopaedia Britannica's editors oversee subject areas in which they have extensive knowledge, whether from years of...
Naval Battle of Campeche
  Naval Battle of Campeche Mexican history [1843] Actions Cite verifiedCite While every effort has been made to follow citation style rules, there may be some discrepancies. Please refer to the appropriate style manual or other sources if you have any questions. Select Citation Style MLA APA Chicago Manual of Style Copy Citation Share Share Share to social media Facebook X...
Leslie Jones
  Leslie Jones American actress Actions Share Share Share to social media Facebook X URL https://www.britannica.com/biography/Leslie-Jones Share Share Share to social media Facebook X URL https://www.britannica.com/biography/Leslie-Jones Also known as: Annette Leslie Jones Written by Leigh Goldstein Leigh Goldstein is a feminist media researcher based in Montreal. Leigh Goldstein Fact-checked by The Editors of Encyclopaedia Britannica Encyclopaedia Britannica's editors oversee subject areas...