What is included in the definition of "intrinsic value" for an option contract?

Intrinsic value in the context of an option contract refers specifically to the value that is inherent in the option because it is in the money. For call options, this means the difference between the current price of the underlying asset and the strike price, provided the current price is above the strike price. For put options, intrinsic value is the difference between the strike price and the current price of the underlying asset, provided the strike price is above the current price.

This definition emphasizes the option’s current profitability if it were exercised immediately. Thus, understanding that intrinsic value solely measures the immediate exercise worth of the option helps in recognizing how options can contribute to an investor's strategies or portfolio.

The other options do not accurately define intrinsic value. The total premium paid relates to the market value of the option and includes both intrinsic value and time value components. The amount of time left until expiration pertains to time value, a separate concept affecting an option's overall value. Overbought or oversold conditions reflect market psychology and technical analysis rather than the intrinsic value derived directly from an option's current effectiveness when exercised.