Stock Market Glossary
Intrinsic value
Estimated economic value of a company or immediate exercise value of an option.
In brief: Estimated economic value of a company or immediate exercise value of an option.
Meaning in practice
For shares, intrinsic value is an estimate based on expected cash flows, assets or comparable metrics. For options, it is the amount by which a contract is currently in the money. Neither use creates certainty because assumptions, rates, growth and market prices can alter the estimate materially.
Context for investors and traders
For traders, this term is most useful when preparing and executing an order. Its meaning depends on the venue, liquidity, time frame and order type. A single reading is not a reliable buy or sell decision.
How to use this in practice
Use the term first to describe the situation and add verifiable data: time frame, benchmark, costs and liquidity. Only then does it become an assessment that can be connected to an investment objective and risk budget.
What to keep in mind
Avoid false precision. Many market terms describe probabilities or historical patterns; they neither guarantee a return nor replace the review of a specific security.
