Extrinsic Value vs Intrinsic Value

The portion of an option's market price above its intrinsic value; also called time value; reflects the time remaining until expiry and the implied volatility of the underlying; declines to zero at expiration regardless of the underlying price.

The immediate exercise value of an options contract if exercised today; for a call option: max(0, spot price − strike price); for a put option: max(0, strike price − spot price); an option with intrinsic value is in-the-money.