What does intrinsic value of an option mean and how to calculate intrinsic value of an option ?

The intrinsic value of an Option refers to the price at which an option's strike price is in-the money. It can also be considered the value of an Option, if it was exercised today.

For call option

Intrinsic Value = Current price for underlying - Strike Prices

For put option

Strike Price = Intrinsic Value - Current price for underlying

If you have a Reliance Call Option priced at 900, and the stock's current price is 920, then your Option's intrinsic value will be:

920-900 = Rs 20

It is possible for the Intrinsic value to an underlying to be either positive or negative. It cannot be negative.