Differentiate between 'In-the-Money' and 'Out-of-the-Money' ▴ Learn

Differentiate between ‘In-the-Money’ and ‘Out-of-the-Money’.

An option is 'in-the-money' (ITM) if exercising it immediately would result in a positive intrinsic value (a profit). For a call, ITM means the asset price is above the strike price.

For a put, ITM means the asset price is below the strike price. An option is 'out-of-the-money' (OTM) if exercising it immediately would result in a zero or negative intrinsic value (a loss).

OTM options have only time value. An option with a strike price equal to the asset price is 'at-the-money' (ATM).

How Does the Concept of ‘Moneyness’ Relate to the Exercise of an Option?

Define “In-The-Money,” “At-The-Money,” and “Out-Of-The-Money” Options

What Is the Significance of an Option Having Zero Intrinsic Value but a Positive Market Price?

How Does ‘Moneyness’ Relate to an Option’s Intrinsic Value?