Glossary
In the money (ITM)
A call with a strike below the underlying price, or a put with a strike above it; the option has intrinsic value.
On this page
An option is in the money (ITM) when exercising it right now would be worth something: a call whose strike is below the underlying's price, or a put whose strike is above it. The amount by which it is in the money is its intrinsic value. Moneyness is one of the first things traders check because it shapes an option's price, its delta and what happens to it at expiration.
How it works
How ITM options behave
- Higher delta. An ITM option's price tracks the stock more closely. A deep ITM call can have a delta near 1.0 and move almost dollar for dollar, so traders sometimes use it as a lower-capital stand-in for shares.
- Less time value as a share of the premium, which means less decay from theta in relative terms, but a higher upfront cost.
- Automatic exercise. At expiration, equity options that are ITM by $0.01 or more are exercised automatically through the clearinghouse unless the holder instructs otherwise. Holders who cannot fund the resulting share purchase or sale should close the position first.
- Assignment risk for sellers rises as an American-style option goes deeper ITM, especially just before an ex-dividend date for calls.
Being in the money is not the same as being profitable: a call bought for $7.20 at the $100 strike only breaks even at expiration if the stock is above $107.20.