What Are the Practical Implications of Trading ITM, ATM, and OTM Options?

Traders choose option moneyness based on their strategy. ITM options have a higher probability of being profitable but are more expensive, offering lower leverage.

OTM options are cheaper, providing higher leverage and potential returns, but have a lower probability of becoming profitable. ATM options offer a balance between risk and reward, with high sensitivity to changes in the underlying asset's price.

Deep-in-the-money options can mimic owning the underlying asset with less capital.