What Is the Concept of ‘In the Money’ (ITM) in Options Trading?

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

For a put option, ITM means the underlying asset's price is below the strike price. ITM options have intrinsic value, which is the amount by which the option is profitable.