Definition
An option is in-the-money when exercising it would result in a positive cash flow. For calls, this means the stock price is above the strike price. For puts, the stock price is below the strike price. ITM options have both intrinsic value and typically higher premiums.
Formula
Example
A $100 call option is ITM when the stock trades at $110. The option has $10 of intrinsic value.
FAQ
What is In The Money (ITM)?
An option with intrinsic value that would be profitable if exercised immediately.
How do you calculate In The Money (ITM)?
A common formula for In The Money (ITM) is: Call ITM: Stock Price > Strike Price | Put ITM: Stock Price < Strike Price
Why is In The Money (ITM) important?
In The Money (ITM) helps investors evaluate options and make more informed decisions.
Related Terms
Out Of The Money (OTM)
An option with no intrinsic value that would not be profitable if exercised.
At The Money (ATM)
An option where the strike price equals the current stock price.
Intrinsic Value
The calculated true worth of a company based on fundamental analysis.
Strike Price
The predetermined price at which an option can be exercised.