What It Means
An option is in the money (ITM) when it already has intrinsic value at the current spot price. A call is ITM when its strike is below spot; a put is ITM when its strike is above spot.
Example
Nifty is trading at ₹24,000. A 23,800 call is ₹200 in the money, because 24,000 − 23,800 = ₹200. That ₹200 is real, calculable value the buyer would pocket by exercising right now. It's separate from whatever extra the market charges on top as time value.
Warning
Being ITM doesn't mean the trade is profitable. The premium you paid already includes intrinsic value plus time value, so you're only ahead if the option's current value exceeds what you paid for it, not just because it happens to have intrinsic value.
Related Terms
- At-The-Money (ATM) — the strike with zero intrinsic value, sitting right at spot.
- Out of the Money (OTM) — the opposite case, with no intrinsic value yet.
- Intrinsic Value — the exact value ITM status measures.
- Strike Price — the fixed price ITM is measured against.
- Moneyness — the umbrella term covering ITM, ATM, and OTM together.