Glossary · Options

Intrinsic and extrinsic value

Intrinsic is an option’s exercise value now; extrinsic is everything else, paid for time and uncertainty.

Why it matters

Buyers pay extrinsic value and watch it melt each day. Sellers collect it. This is the whole game of options.

How to read it

A $100 call on a $105 stock has $5 of intrinsic value. If it costs $7, the other $2 is extrinsic.

Related

PremiumThe price of an option, quoted per share.ThetaHow much value an option loses each day from time passing, all else equal.

In the Cluenex app, this explanation opens next to every intrinsic and extrinsic value figure, with the live reading for the stock you are looking at. Open it in Cluenex