What Is the Relationship between an Option's Intrinsic Value and Its ITM Status? ▴ Learn

What Is the Relationship between an Option’s Intrinsic Value and Its ITM Status?

An option is 'in-the-money' (ITM) because it possesses positive intrinsic value. Intrinsic value is the immediate profit that would be realized if the option were exercised right now, ignoring the premium paid.

If the market price minus the strike price (for a Call) or the strike price minus the market price (for a Put) is greater than zero, the option has intrinsic value and is ITM. If this difference is zero or negative, the intrinsic value is zero, and the option is ATM or OTM.

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