In the Money
An option is 'in the money' (ITM) when it has positive intrinsic value — meaning a call option's strike price is below the current stock price, or a put option's strike price is above the current stock price.
The moneyness of an option describes the relationship between the strike price and the current market price of the underlying stock. An in-the-money option has real, immediate exercise value. For a call, that means the stock is already trading above the strike — you could exercise right now and buy shares below market price. For a put, the stock is trading below the strike — you could sell shares at above-market price by exercising.
Intrinsic value for an ITM call equals the stock price minus the strike price, multiplied by 100 (shares per contract). If a stock trades at $75 and you hold a $70 call, the intrinsic value is $5 per share, or $500 per contract. An ITM put has intrinsic value equal to the strike minus the stock price. A $80 put on a $75 stock carries $5 of intrinsic value.
Options that are deep in the money behave increasingly like their underlying stock. Their delta approaches 1.0 for calls or -1.0 for puts, meaning the option moves nearly dollar-for-dollar with each $1 change in the stock. This makes deep ITM options useful for investors who want leveraged stock exposure with defined downside but are willing to pay a higher upfront premium.
ITM options carry a higher premium than at-the-money or out-of-the-money contracts because they contain intrinsic value in addition to time value. However, they are less susceptible to total loss from time decay alone, since the intrinsic value component does not erode with the passage of time — only time value does. This makes ITM options more conservative choices for buyers compared to OTM contracts, though the capital at risk is larger in absolute dollar terms.
The OCC automatically exercises any option that is at least $0.01 in the money at expiration, provided the account holder has not submitted contrary instructions. This auto-exercise rule ensures that in-the-money options deliver their intrinsic value to the holder at expiration without requiring manual action.