I am looking for a straightforward way to determine the intrinsic value of options. The formulas I see online are too complex. I want something simple since I trade on my phone during breaks and need quick calculations.
Intrinsic value calculation:
• Calls: Stock price - Strike price (if positive)
• Puts: Strike price - Stock price (if positive)
• Negative results = $0 intrinsic value
Option premium above intrinsic value equals time value.
The simple approach works best when trading options on mobile. For calls, take the stock price and subtract your strike price - that’s intrinsic value.
Puts are the opposite - strike price minus current stock price. Anything you pay above intrinsic value is time premium.
Keep it basic since most mobile apps show real-time prices anyway.
Forget the complicated formulas. When you’re looking at a call option, just check if the stock price is above your strike price. If it is, subtract strike from stock price and that’s your intrinsic value. Below the strike means zero intrinsic value. Puts work backwards - strike minus stock price when the stock is below your strike. Everything else you pay is time decay eating your money. This mental math takes 5 seconds and works perfectly for phone trading.
For calls, subtract the strike from the current price. For puts, do the opposite.
Options intrinsic value is just current price minus strike price for calls. For puts it’s strike minus current price.
I learned this the hard way after losing $300 on Apple calls because I didn’t understand I was paying pure time value when the stock was below my strike.
Now I calculate it in my head before every options trade.