Explain the Term ‘In-the-Money’ for a Call Option.
A call option is 'in-the-money' (ITM) when the current price of the underlying asset is higher than the option's strike price. This means the option holder could exercise the right to buy the asset at the lower strike price and immediately sell it at the higher market price for a profit (before premium cost).
Glossar
Intrinsic Value
Valuation ⎊ This represents the in-the-money amount of an option, calculated as the difference between the spot price and the strike price, if positive, otherwise zero.
Option Holder
Entitlement ⎊ An option holder, within cryptocurrency derivatives, represents the individual or entity possessing the contractual right, but not the obligation, to buy or sell an underlying asset at a predetermined price on or before a specified date.
Strike Price
Reference ⎊ The Strike Price is the predetermined reference level set at the contract's inception against which the underlying crypto asset's spot price is compared at expiration or exercise.
Underlying Asset
Foundation ⎊ The concept of an Underlying Asset, within cryptocurrency derivatives and financial markets, establishes the core reference point for valuation and risk transfer.
Market Price
Valuation ⎊ Current rate at which a digital asset is being traded on an exchange reflects the collective sentiment of all participants.