In-the-Money (ITM)

In-the-Money (ITM) means an option contract has intrinsic value—it would make money if you exercised it right now. For a call option (the right to buy), ITM means the stock price is above the strike price (the agreed purchase price). For a put option (the right to sell), ITM means the stock price is below the strike price. You'll hear this term constantly when trading options, since it tells you whether an option is actually profitable. For example, if you own a call option to buy stock at $50 and the stock trades at $55, you're in-the-money by $5 per share. The deeper ITM an option is, the more valuable it typically becomes.