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

Moneyness describes the relationship between the strike price of an option and the current market price of the underlying asset (ITM, OTM, ATM). Moneyness is the primary factor determining whether an option will be exercised.

An option that is deep in-the-money has a high probability of being exercised because it is profitable. Out-of-the-money options are almost never exercised.