This is because that call option allows the owner to buy the underlying stock at a price of 1.00, which they could then sell at its current market value of 1.20.
[2] This describes what happened in one GameStop options trade that became famous: a trader spent $53,000 buying a large number of call options that were extremely cheap, since they were so far out-of-the-money that other traders thought it was very unlikely that they would ever hold intrinsic value.
Importantly, the required return used here to discount these cash flows, must include a risk premium appropriate to the company in question.
[5] An alternative approach is to view intrinsic value as linked to the business' current operations.
[6] Relevant here are the fixed assets, working capital and (initial) "opex" required so as to replicate or recreate the ongoing business.
Note though, that under this approach intangible assets (including "goodwill") are ignored, and the valuation may (will) then be understated.