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Finance Glossary

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Intrinsic Value (of An Option)

Definition:

In the previous example, the intrinsic value of the KO call option is $10. There may be time left on the option before it expires so it is likely that the option would trade for more than its intrinsic value. There are two components to value in an option: intrinsic value and time value. Intrinsic value can never be less than zero. If the intrinsic value is zero, then any value in the option is strictly time value.

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