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Trading and Investment Terminology

In The Money and (ITM) Out Of The Money (OTM)

In the money (ITM) is a expression that alludes to an option that has intrinsic value. In the money, hence signifies that an option has value at a strike price that is favorable when compared to the existing market price of a stock:

 

An in the money call option implies that the option contract holder has the chance to purchase the stock below its present market price.

 

An in the money put option, on the other hand, implies that the option holder has the chance to sell the stock above its present market price.

 

An option that is in the money does not really imply that the trader is getting a profit on the trade.

 

The expense of purchasing the option and commission charges must also be taken into consideration.

 

In the money options are the opposite out of the money options.

 

Out of the money (OTM) is an expression used to depict an option contract that only contains intrinsic value. These options will probably have a delta less than 50.0.

 

Strike price of an out of the money call option will be higher than the market price of that stock. Then again an out of the money put option has a strike price lower than the market price of that stock.

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