Intrinsic value is the component of an option premium that represents the value between where the underlying futures price is relative to an option’s strike price. Call options have intrinsic value if the strike price is below where the futures are trading while a put option has intrinsic value if the strike price is above where the futures are trading. The amount of intrinsic value is the exact difference between the futures price and strike price.
An example of this would be:
March 2014 corn futures trading at $4.50 per bushel
March 2014 $4.00 call option premium = $0.60 cents
In this example, the intrinsic value is $0.50 and the remaining value is time value.