In-the-money (ITM) is a term used in options trading to describe an option that has intrinsic value. An option is considered in-the-money when the current market price of the underlying asset is above the strike price of a call option, or below the strike price of a put option.
For example, if a trader holds a call option with a strike price of $50 and the current market price of the underlying asset is $60, the option is in-the-money by $10. Similarly, if a trader holds a put option with a strike price of $50 and the current market price of the underlying asset is $40, the option is in-the-money by $10.
When an option is in-the-money, the option holder has the right to exercise the option and make a profit. Alternatively, the option holder can sell the option to another trader for a profit without exercising the option.
In-the-money options have a higher premium than out-of-the-money options because they have intrinsic value, meaning they can be exercised for a profit.
