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Options Pricing - Intrinsic Value


 Currency Options  Option Pricing Option Types
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 Definitions Delta Call/Put Options
 Trading and Hedging Gamma Knock Outs
 Intrinsic Value Theta  Knock Ins
 Extrinsic Value Risk Reversals Average Rate
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An option is said to have intrinsic value where the strike price of the option is more favourable than the current market forward rate.

As a general rule, the greater the intrinsic value of an option the higher its premium.
  • An option with some intrinsic value is described as being "in-the-money".
  • An option with no intrinsic value is said to be "out-of-the-money".
  • Where the strike price of the option is equal to the current forward rate the option is said to be "at-the-money".

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