A yes-no, up-down, high-low case representation for outcomes, usually as applied to the investing in derivative securities.
Like..."if IBM's quarter is good, then the call option is likely worth x; if IBM's quarter is bad, then the call option is likely worth x over 100."
The whole idea behind a binomial tree is to try and simplify an otherwise ungodly set of difficult-to-mathematically-model outcomes that really should be done by robots. Or at least computers. The tree thing just means that there's usually a physical drawing or representation of the potential outcomes.
Related or Semi-related Video
![Finance: What is Intrinsic Value (of An Option and of an Asset)?](https://media1.shmoop.com/video/thumbnails/COURSE.FINANCE.855_770x433.jpg)
Finance: What is Intrinsic Value (of An ...6 Views
Finance allah shmoop what is the intrinsic value of an
option All right this is brandi She owns a twelve
dollars strike price call option toe buy a share of
my fifteen minutes are up dot com a retirement home
chain for reality tv stars who recently gained self awareness
Well the stock is trading for fifteen bucks a share
of this moment Her strike price is twelve so the
intrinsic value of that option is fifteen minutes twelve or
three bucks that is it is three dollars in the
money and if brandy converted it into a share this
moment and then immediately sold the stock for fifteen dollars
in cash well she'd make three bucks But there's a
catch per call option doesn't expire for five weeks so
that three dollars in the money is actually worth more
than three dollars because she has data or time yet
to exercise and convert or just sell the option itself
So it's worth mohr because well a stock might go
up from fifteen dollars in overtime Stocks go up so
in the next five weeks well couldn't go up a
dime twenty cents twenty five cents and make that three
Dollars worth three ten three twenty three Twenty five Sure
sure it could happen So yeah that's The difference between
actual value and intrinsic value You get seita kickers in
there making the option's worth more than just converting them
into stock and selling them right there And yeah it
looks like our one and a half minutes are up
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