intrinsic value(redirected from intrinsic)
Also found in: Dictionary, Thesaurus, Medical, Legal, Encyclopedia, Wikipedia.
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.
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.
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.