Executive Summary
How do I calculate the intrinsic value of my stock options?
Intrinsic value = (current stock price minus strike price) × number of shares. If the stock is $50 and your strike is $10, each share has $40 of intrinsic value. For 1,000 options, that's $40,000. If the stock is below your strike, intrinsic value is zero—you're underwater. Intrinsic value is the profit you'd make if you exercised and sold today, before taxes.
You want to know what your options are worth. The simplest answer: intrinsic value—the profit you'd make if you exercised right now and sold. It's a quick way to size up your grant.
The bottom line: Intrinsic value = (current price − strike) × shares. It's paper value. You don't have the cash until you exercise and sell. And you'll owe tax. But it's the right number for "what would I get today?" See our strike price guide for the basics.
The Formula
Intrinsic Value = (Current Stock Price − Strike Price) × Number of Shares
If the result is negative, intrinsic value is zero. You can't have negative intrinsic value—you just wouldn't exercise.
Examples
| Current Price | Strike | Shares | Intrinsic Value |
|---|---|---|---|
| $50 | $10 | 1,000 | ($50 − $10) × 1,000 = $40,000 |
| $30 | $25 | 500 | ($30 − $25) × 500 = $2,500 |
| $15 | $20 | 2,000 | Underwater → $0 |
| $100 | $100 | 1,000 | At the money → $0 |
What It Doesn't Include
| Factor | Why It Matters |
|---|---|
| Taxes | You'll owe income tax (NSO) or AMT (ISO) on the spread. Intrinsic value is before tax. |
| Liquidity | If the stock is private, you might not be able to sell. Intrinsic value assumes you can. |
| Time | For traded options, time value matters. For employee options, intrinsic value is the main number. |
| Risk | The stock can go down. Intrinsic value is a snapshot. |
When to Use It
| Use Case | How |
|---|---|
| Compare job offers | Intrinsic value of each grant (at current valuation) |
| Decide when to exercise | If intrinsic value is high and you need cash, exercise and sell |
| Track your grant | As the stock moves, intrinsic value changes |
| Plan for taxes | Intrinsic value ≈ taxable spread for NSOs |
Intrinsic Value vs. What You'll Actually Get
Intrinsic value is before tax. If you have $100,000 of intrinsic value and exercise NSOs, you might owe $37,000 in federal tax (plus state). Your net might be $63,000. Intrinsic value tells you the gross—not the net.
Frequently Asked Questions
Is intrinsic value the same as fair market value?
No. Fair market value (FMV) is the price of a share. Intrinsic value is the profit per share (FMV − strike) × shares. FMV is one input; intrinsic value is the result.
What if my company is private?
Use the 409A valuation or latest funding round price as the "current price." It's an estimate. You can't sell until there's liquidity, so intrinsic value is theoretical until then.
Does intrinsic value change with vesting?
No. Intrinsic value is about the shares you're looking at. Unvested options have intrinsic value too—you just can't exercise them yet. The formula is the same: (price − strike) × shares.
Disclaimer: This guide is for educational purposes. It does not constitute tax or financial advice.
Last Updated: March 2026 | Research Team: VestingStrategy