What is an in the money call option?

An in the money call option, therefore, is one that has a strike price lower than the current stock price. A call option with a strike price of $132.50, for example, would be considered ITM if the underlying stock is valued at $135 per share because the strike price has already been exceeded.

When is a call option in the money (ITM)?

A call option is in the money (ITM) when the underlying security's current market price is higher than the call option's strike price. The call option is in the money because the call option buyer has the right to buy the stock below its current trading price.

What does “in the money” mean?

“In the money” refers to an option that will produce a profit if it is exercised. It differs for call and put options. When a call option is in the money, the strike price for the underlying asset is less than the market price. Inversely, a put option is in the money if the strike price of the underlying asset is more than the market price.

Why should a call go into the money?

That is why it is so beneficial for a call to go into the money. In fact, at-the-money (ATM) options are usually the most liquid and frequently traded in part because they capture the transformation of out-of-the-money options into in-the-money options.