Intrinsic Value

What this video covers

• The core identity premium equals intrinsic value plus time value, and which portion is the "real" in-the-money worth
• Why the underlying for these options is the futures price, not a stock price, and how that frames every calculation
• Call intrinsic value: futures price minus strike price, activated only when futures climb above the strike
• Put intrinsic value: strike price minus futures price, activated only when futures plunge below the strike
• Why intrinsic value can never be negative, and why out-of-the-money options default to zero (not a negative number)
• The three states of moneyness (in-the-money, at-the-money, out-of-the-money) and which states carry zero intrinsic value
• The most-flipped exam trap: catching yourself using futures minus strike for a put or strike minus futures for a call