In-the-Money

An option is “in-the-money” (ITM) when it has intrinsic value, offering the holder immediate profit upon exercise.

For a call option, ITM means the stock price is above the strike price. A call option with a strike price of $50 is ITM when the stock is above $50. If the stock is at $55, exercising the call would give you an instant profit of $5 per share ($55 – $50).

A put option is ITM when the stock price is below the strike price. A put option with a strike price of $50 is ITM when the stock is trading below $50. If the stock is at $45, you could buy the stock at that price, exercise the put at $50 and immediately generate a $5 per share profit ($50 – $45).