Intrinsic Value

Intrinsic value is what an option would be worth if exercised this instant: max(0, stock price - strike) for a call, max(0, strike - stock price) for a put. It can never be negative — an option that is unfavorable to exercise simply has zero intrinsic value.

Intrinsic value is the hard floor under an option's price. An option can trade above it (the excess is extrinsic value) but not meaningfully below it, because arbitrageurs would exercise the discount away. At expiration, intrinsic value is all that remains.