The difference between the price of the underlying asset and the exercise price of an option is called __________.

The intrinsic value of an option is the difference between the current market price of the underlying asset and the option’s exercise (strike) price. If an option allows buying the asset below the current market price, or selling it above the market price, it has intrinsic value. This value reflects the immediate profit an option holder could earn if the option were exercised right away. In contrast, the extrinsic value comes from factors like time remaining until expiration and market volatility.