What Is In the Money?
In the money means an option has intrinsic value. A call is ITM when the stock trades above the strike; a put is ITM when the stock trades below the strike.
Definition
An option is 'in the money' (ITM) when it has intrinsic value — meaning you could exercise it profitably right now. For a call option, ITM means the stock price is above the strike price. For a put option, ITM means the stock price is below the strike price.
ITM options are more expensive than out-of-the-money options because they contain real intrinsic value. Deeply ITM options behave more like the underlying stock — a deep ITM call has a delta close to 1.0, meaning it moves nearly dollar-for-dollar with the stock.
Traders often use ITM options as a stock substitute when they want directional exposure with lower capital. A deep ITM call on AAPL might cost $20 per share ($2,000) vs buying 100 shares at $180 ($18,000) — with similar directional exposure.
Real-World Example
You own a call option with a $100 strike. If the stock is at $115, your call is $15 in the money — it has $15 of intrinsic value. Even if you exercised right now, you'd profit $15/share ($1,500 per contract).
Why It Matters
Knowing whether your option is ITM, OTM, or ATM determines how it behaves — its delta, time decay rate, and whether it will auto-exercise at expiration.
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Frequently Asked Questions
Do in-the-money options always get exercised?
ITM options are typically auto-exercised at expiration by your broker if they're at least $0.01 in the money. Before expiration, most traders sell the option rather than exercise it, because selling captures both intrinsic value and any remaining time value.
Should I buy ITM or OTM options?
ITM options are safer (higher probability of profit, lower theta decay impact) but cost more. OTM options are cheaper but require a bigger stock move to profit. Beginners generally do better with ITM or near-the-money options that have a higher probability of profit.
What is deep in the money?
An option is 'deep in the money' when the stock price is far above (for calls) or far below (for puts) the strike price. Deep ITM options have very high deltas (close to 1.0) and behave almost like owning the stock directly.
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