In the money (ITM)


‘In the money’ is a term applied in options trading to denote an options contract is profitable or has a positive profitability.

In options trading, if a trader buys a call option at a strike price and during the contract’s validity, the underlying asset exceeds the strike price, the call option is said to be in the money. For a put option, the opposite is true — if the asset’s price is less than the strike price, the option is in the money.

Example

Say, we purchased a call option on an equity share at a strike price of Rs 50 with a three-month tenure. If the spot price of the stock rises above Rs 50, our option would be said to be in the money.

Know more

In options trading, profitability of an option is called moneyness. When the profitability of an option (or moneyness) has zero value then it is called at the money, if positive then in the money, if a negative value then out of money.