In-the-Money (ITM) refers to an option that currently has intrinsic value because the market price of the underlying asset has moved favourably relative to the strike price. For a call option, it is ITM when the market price is above the strike price. For a put option, it is ITM when the market price is below the strike price.
- In-the-Money Call: When the underlying price is ↑ strike price.
- In-the-Money Put: When the underlying price is ↓ strike price.
- Intrinsic Value: ITM options have real, immediate value.
- Higher Premium: ITM options have higher premiums (intrinsic + time value).
- Exercise Likelihood: More likely to be exercised before/at expiration.
Example:
- Call: NIFTY at 18,600 → 18000 Call is ITM (market above strike).
- Put: NIFTY at 17,600 → 18000 Put is ITM (market below strike).
