ITM in plain words
ITM stands for "in the money". An option is in the money when using it right now would be worth something. A call is ITM when the stock price is above the strike price. A put is ITM when the stock price is below the strike price.
The opposite is out of the money (OTM), where using the option right now would be worth nothing. An option whose strike is right at the stock price is called at the money (ATM).
A simple example
Say a stock trades at $105. A call with a $100 strike is ITM by $5: it gives you the right to buy at $100 something that trades at $105. A call with a $110 strike is OTM. It is the other way around for puts: a $110 put is ITM by $5, and a $100 put is OTM.
That $5 is the option's intrinsic value. An option's price is its intrinsic value plus extrinsic (time) value, so an ITM option always costs at least its intrinsic value.
What being ITM means for the price
The deeper an option is in the money, the more it tends to move like the stock itself. Its delta gets closer to 1 for a call (or -1 for a put), and it has less time value left to lose as time passes.
Being ITM does not mean the trade is profitable. If you paid $7 for that $100 call and the stock is at $105 at expiration, the call is ITM by $5 but you are still down $2 per share, because you paid more than the option is worth.
ITM at expiration and assignment
Options that finish in the money are usually exercised automatically at expiration (a common cutoff is at least $0.01 in the money). If you sold the option, you can be assigned and have to buy or sell shares at the strike.
American-style options, which include most stock options, can also be exercised before expiration, so a seller of an ITM option can be assigned earlier than expected. This is one reason sellers pay attention to how deep in the money their options are.
In-The-Money (ITM) FAQ
What does ITM mean in options?
ITM means "in the money": the option has intrinsic value because the stock price is above the strike for a call, or below the strike for a put.
How can I tell if a call or a put is ITM?
Compare the stock price to the strike. A call is ITM when the stock is above the strike. A put is ITM when the stock is below the strike.
Does ITM mean I am making money?
Not necessarily. An ITM option has intrinsic value, but your profit depends on what you paid for it. You only profit if its value at the end is higher than your cost.
What is the difference between ITM and OTM options?
An ITM option has intrinsic value and costs more. An OTM option has none, is cheaper, and is more likely to expire worthless, so it is a bigger bet that the stock will move.
Related terms
Educational content only, not financial advice.