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Intrinsic Value

When you look at an option premium price, the fraction of the option that is in the money is intrinsic value of the option. In fact, intrinsic value is the value of the option if it is exercised today. It is the fraction of the option that sill not lose value because of the passage of time. In the money options have intrinsic value, but out of the money and at the money options have no intrinsic value at all and all they have is the time value.

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