In the Money is a situation when your stock option is worth money and you can turn around and sell or exercise it for a profit. The strike price of an option compared to the current stock price is what determines the option’s Intrinsic Value and hence determines whether the option is in, at or out of the money. If a call option’s strike price is less than the current market price of the underlying asset it is said to be in-the-money – as the option buyer can exercise and make an instant profit.
Consequently, if a calls strike price is higher than the current underlying asset it is said to be out-of-the-money because it has no Intrinsic Value. Confused? Take a look at these quick formulas
1.For a call option, when the option’s strike price is below the market price of the underlying asset.
2. For a put option, when the strike price is above the market price of the underlying asset.
Call Options
In-the-Money = Strike price less than underlying price
At-the-Money = Strike price is the same as the underlying price
Out-of-the-Money = Strike price is greater than the underlying price
Put Options
In-the-Money = Strike price is greater than the underlying price
At-the-Money = Strike price is the same as the underlying price
Out-of-the-Money = Strike price is less than the underlying price