Definition of in the money
- Whatever horse I bet on, it never finishes in the money.
- They struggled for many years but now they're in the money.
: something generally accepted as a medium of exchange, a measure of value, or a means of payment: such as
: officially coined or stamped metal currency
: money of account
: involving or reliable in a crucial situation
In the money refers to an option contract that, if it were exercised today, would be worth more than $0.
A call option is said to be in the money when its exercise price is below the current price of the underlying asset. Put options are in the money when the exercise price is above the market price of the underlying asset.
Suppose ABC stock trades at $300 per share. An ABC call option with a strike price of $200 is in the money since the option holder could buy ABC at $200 and turn around and sell it for $300. The intrinsic value of this call option is $100.
Likewise, an ABC put option with a strike price of $350 is in the money because the option holder could buy a share of ABC for $300, then turn around and sell it via the option for $350. The intrinsic value of the put option is $50.
[Click here to learn more from our tutorial, Profiting from Options.]
If the option holder doesn’t have enough funds to pay the strike price, he should sell the in the money option so as to lock in a profit before the option expires.
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