inthemoney

Inthemoney, often abbreviated ITM, is a term used in options trading to describe an option that would have positive intrinsic value if exercised immediately. It applies to both call and put options, with the classification depending on the relationship between the underlying price and the option’s strike price.

For a call option, an option is ITM when the current price of the underlying asset (S) exceeds the strike price (K). Its intrinsic value is S − K. For a put option, an option is ITM when the strike price (K) is greater than the current underlying price (S), with intrinsic value K − S. If S equals K, the option is at the money (ATM) and has zero intrinsic value.

ITM status is evaluated at the present moment and can change as the underlying price moves. Options also have time value, so an ITM option may trade above its intrinsic value due to remaining time until expiration. At expiration, the option’s payoff equals the intrinsic value (for calls, max(S − K, 0); for puts, max(K − S, 0)).

Examples: with a stock trading at 100, a call with strike 90 is ITM by 10 (intrinsic value 10). A put with strike 110 is ITM by 10. A call with strike 100 is at the money; a put with strike 100 is at the money.

ITM status affects option pricing, delta, and liquidity. It is one of the key moneyness classifications—ITM, ATM, and OTM (out of the money)—used by traders to assess risk, payoff, and sensitivity to moves in the underlying asset.