intrinsic value

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Related to Intrinsic Values: instrumental values, Extrinsic Values

Intrinsic value

The value of an option if it were to expire immediately with the underlying stock at its current price; the amount by which an option is in-the-money. For call options, this is the difference between the stock price and the strike price, if that difference is a positive number, or zero otherwise. For put options it is the difference between the strike price and the stock price, if that difference is positive, and zero otherwise. See also: In-the-Money, Time Value Premium, Parity.

Intrinsic Value

1. The actual value of an asset. That is, the intrinsic value is what an asset is actually worth, rather than its current market value, which is overly influenced by market conditions such as a recession or a speculative bubble. One may think of the intrinsic value of an asset as its value "in a perfect world," because one may not always be able to receive the intrinsic value. For example, the intrinsic value of a baseball card may be $10,000, but if prevailing market conditions render investors uninterested in buying baseball cards, one may only be able to sell the card for $5,000. That said, the line between intrinsic and extrinsic value is sometimes blurry.

2. The gain that an option holder would receive by exercising an in-the-money option. That is, the intrinsic value of an option is how much the strike price is below the underlying asset (for a call) or above the underlying asset (for a put). These options have intrinsic value because they always result in a profit. As a result, these options may be sold for a much higher price than the investor paid for the option.

intrinsic value

The value of a security, justified by factors such as assets, dividends, earnings, and management quality. Intrinsic value is at the core of fundamental analysis since it is used in an attempt to calculate the value for an individual stock and then compare it with the market price. Because analysts view facts differently, there is often a wide disparity in estimates of a particular stock's intrinsic value.

Intrinsic value.

A company's intrinsic value, or underlying value, is used to calculate its projected worth.

You determine intrinsic value by subtracting long-term debt from anticipated future assets, including profits, the potential for increased efficiency, and the sale of new stock.

Another approach is to calculate intrinsic value by dividing the company's estimated future earnings by the number of its existing shares. This method weighs the current price of a stock against its future worth.

Critics of using intrinsic worth as a way to evaluate potential investments point out that all the numbers except debt are hypothetical.

The term is also used in options trading to indicate the amount by which an option is in-the-money. For example, an equity call option with a strike price of 35 has an intrinsic value of $4 if the market price of the underlying stock is $39. But if the market price drops to $34, the option has no intrinsic value.

intrinsic value

An appraisal term meaning an intangible value based on a property's proximity to certain features and amenities, such as good schools, health care, and shopping.

References in periodicals archive ?
In column K the intrinsic values of the option at the corresponding nodes are computed using Excel IF statements to determine whether the stock prices at those nodes exceed the option's exercise price.
In year 4 the intrinsic values for the 14 paths not previously truncated are probability-weighted and discounted to determine their present values (that is, the probability is multiplied by the option's intrinsic value and discounted by the risk-free interest rate to determine the path's present value).
By referring to "wildlife" generally, Parliament also appeared to consider both individual living wild organisms and wildlife species as having intrinsic value (the Act defines "wildlife species" broadly as including subspecies and distinct populations of wildlife species), thus, taking a bold stand on another aspect of the philosophical debate.
However, there is widespread disagreement on which of these respects count for purposes of having intrinsic value.
Intrinsic values are "things" valued for their own sake.
Instrumental values are valued only because they are perceived to be the key to protecting or fulfilling intrinsic values.
The SAT contracted with Paul Herbert Kittay of the Panamanian firm Intrinsic Values to act as the purchasing agent.
Though value-based investments are subject to the risk that the broad market may not recognize their intrinsic values, Heartland's time-tested process for picking stocks is in our opinion, the most prudent way to build a portfolio.
The John Hancock Focused Relative Value Fund seeks long-term growth of capital by investing in a concentrated number of companies selling at what appear to be substantial discounts to their intrinsic values.
Davison is painfully aware of this question and devotes much of chapter seven to confronting its various corollaries, especially the two which might be formulated as, 'What good is it knowing that everything is intrinsically valuable unless we have a way to compare the intrinsic values of different particulars?
The options that have only zero intrinsic values (ATM or OTM) comprise time values.
However, one needs to be well- versed in concepts like ITM, ATM, OTM, time value and intrinsic value to trade in options.