in the money
An option that has intrinsic value — a call option when the stock price is above the strike price, or a put option when the stock price is below the strike price.
Example
“With a $50 strike price and the stock at $60, the call option was $10 in the money.”
Memory Tip
IN THE MONEY = option has real value. Call: stock above strike. Put: stock below strike.
Why It Matters
Understanding if an option is in the money helps you know whether exercising it would be profitable right now. This matters because it affects your decision to hold, sell, or exercise an option, and directly impacts how much money you could make or lose on your investment.
Common Misconception
Many people think an in the money option is always worth exercising immediately. However, you might want to hold onto an in the money option if you expect the stock to move even further in your favor, since selling the option itself can sometimes be more profitable than exercising it.
In Practice
Suppose you own a call option with a strike price of 50 dollars and the stock is currently trading at 58 dollars. Your option is in the money by 8 dollars, meaning you could exercise it and buy shares at 50 dollars to immediately sell them at 58 dollars for a gain. If the stock continues rising to 65 dollars before expiration, your option becomes even more valuable.
Etymology
IN THE MONEY = the option has positive intrinsic value. You're 'in the money' — it's worth exercising.
Common Misspellings
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Related Terms
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