In the money, or ITM, describes an option whose strike price already works in your favour at the current market price. It has intrinsic value today.
For a call option that means the underlying price is above the strike. For a put it means the underlying is below the strike. The term is used across markets, from equity options to index, futures and crypto options.
What being in the money means for calls and puts
Think of the strike as the deal you locked in. If the market has moved past that deal in a way that benefits you, the option is in the money.
- Calls: In the money when underlying price (S) is greater than strike (K). Intrinsic value is S − K.
- Puts: In the money when S is less than K. Intrinsic value is K − S.
Example: a call with a 100 strike when the share trades at 106 is ITM by 6. A put with a 100 strike when the share trades at 96 is ITM by 4.
Traders also say deep ITM for options far beyond the strike, and near the money for options close to the current price. At the money means the strike is roughly equal to the current price. Out of the money means the strike would not be worth exercising right now.
Intrinsic value and time value: how the pieces add up
An option’s market price combines two parts: intrinsic value plus time value. Intrinsic value is the immediate worth if you exercised now. Time value is everything else the market is paying for the chance of better outcomes before expiry, including volatility expectations and interest or dividend effects.
If a call with strike 100 trades when the share is 106, its intrinsic value is 6. Suppose the option’s quoted premium is 8. The extra 2 is time value. As time passes, time value tends to shrink. Deep ITM options often carry less time value because the remaining uncertainty about finishing ITM is smaller, though this varies with volatility and time to expiry.
Does being in the money mean you’re making money?
No. ITM only tells you there is intrinsic value. Profit depends on what you paid or received for the option and any costs.
- Buyer of a call: Break-even at expiry is strike plus premium paid. If you paid 4 for a 100 call, you need the stock above 104 at expiry to break even. At 102 you are ITM but still down 2.
- Buyer of a put: Break-even at expiry is strike minus premium. Pay 3 for a 100 put and you need the stock below 97 to break even.
- Seller (writer): Being ITM means unrealised loss grows as intrinsic value increases. You also face assignment risk, which can arrive before expiry on American-style contracts.
Before expiry, an ITM option can still trade above or below your break-even because of remaining time value. That is why ITM is a snapshot of moneyness, not a full P&L statement.
What happens at expiry if an option is in the money
Options stop existing on their expiry date. If an option finishes ITM, most markets settle it automatically under exchange or broker rules. The details vary by venue and provider, and rules can change.
Key points traders watch:
- Settlement price: ITM status at expiry is usually tested against an official final price such as the EDSP for certain futures and options. This can differ from the last traded price.
- Automatic exercise thresholds: Some markets auto-exercise if the option is ITM by any amount, others set a minimum amount to avoid small, uneconomic exercises. Brokers may let you opt out or set preferences.
- Delivery vs cash: Equity and futures options can settle by physical delivery of shares or contracts, or by cash. The contract specification decides which. Your account must be ready for the resulting position or cash flow.
- American vs European style: American options may be exercised any time before expiry. European options can only be exercised at expiry. Both settle if ITM at expiry, based on the settlement price.
Where you’ll encounter ITM in trading
Platform option chains typically highlight ITM strikes, often with different shading from out-of-the-money strikes. Market commentary might say a rally pushed a block of calls in the money, meaning those strikes now have intrinsic value.
Risk and hedging also interact with moneyness. ITM calls usually have delta above 0.5 and tend toward 1 as they move deeper ITM. ITM puts have delta below −0.5 and tend toward −1. That makes ITM options behave more like the underlying, which is why some traders use deep ITM calls as a stock substitute. Time decay still applies, and liquidity or bid–ask spreads can be wider at less popular strikes.
In corporate actions such as dividends, early exercise decisions for American options often hinge on whether a call is sufficiently ITM to justify exercising before the ex-dividend date. The calculus depends on rates, remaining time value and expected payouts, and practices vary by market.
Common mix-ups to avoid
- ITM vs profitable: An option can be ITM and unprofitable after factoring in the premium and costs. Likewise, an out-of-the-money option bought cheaply can be sold for a profit if its time value rises.
- Moneyness vs forecast: ITM is about the current spot or settlement price relative to the strike, not a bet that it will stay that way. Prices can move and flip ITM to OTM quickly.
- Uniform rules: Automatic exercise, settlement method and even how the final price is calculated can differ by exchange and broker. Always check the contract specs and your provider’s process.
Quick examples across markets
Equities: a 50 call on a share trading at 54 is ITM by 4. A 60 put on the same share is OTM by 6.
Index or futures options: moneyness works the same way, but expiry settlement typically uses an official fixing level or delivery settlement price rather than the last screen quote.
Crypto options: the same definitions apply. Whether an ITM crypto option auto-exercises and how it settles in coin or cash is platform specific. Check the contract and venue rules.