In the money (ITM) describes an option that has intrinsic value—meaning it would be profitable if exercised immediately. A call option is ITM when the stock price exceeds the strike price. A put option is ITM when the stock price is below the strike price. ITM options are more expensive because they already have real value built in.
- Call ITM: Stock price > Strike price
- Put ITM: Stock price < Strike price
- ITM options have intrinsic value
How In The Money Works
ITM depends on stock vs strike:
In The Money Examples:
Stock price: $100
Call Options:
$90 Strike Call: ITM by $10 (intrinsic value)
$95 Strike Call: ITM by $5
$100 Strike Call: ATM (at the money)
$105 Strike Call: OTM (out of the money)
Put Options:
$110 Strike Put: ITM by $10 (intrinsic value)
$105 Strike Put: ITM by $5
$100 Strike Put: ATM
$95 Strike Put: OTM
Quick Reference: Moneyness
| Option | ITM When | Intrinsic Value |
|---|---|---|
| Call | Stock > Strike | Stock - Strike |
| Put | Stock < Strike | Strike - Stock |
Example: ITM Option Trade
Buying ITM Call:
| Factor | Value |
|---|---|
| Stock Price | $105 |
| Strike Price | $100 |
| ITM Amount | $5 |
| Premium | $8 |
| Intrinsic Value | $5 |
| Time Value | $3 |
| Delta | 0.70 |
If stock goes to $115, option worth at least $15.
In the money means an option has intrinsic value. Calls are ITM when the stock is above the strike; puts are ITM when the stock is below the strike. ITM options cost more but have higher probability of profit. They already have real value.
ITM Option Characteristics
Higher Delta
ITM options move more with the stock. Delta 0.70-0.90 for significantly ITM options.
Higher Cost
You pay for intrinsic value plus time value. More capital required.
Higher Win Rate
ITM options need smaller moves to profit. Higher probability of success.
Lower Percentage Returns
Because they cost more, percentage gains are lower than OTM options.
Why Trade ITM Options
Stock Replacement
Deep ITM calls act like stock but with less capital and limited downside.
Higher Probability
ITM options are more likely to expire with value.
Less Theta Decay
ITM options have less time value, so less is lost to decay.
More Responsive to Movement
Higher delta means faster response to favorable moves.
ITM vs OTM Comparison
| Factor | ITM | OTM |
|---|---|---|
| Cost | Higher | Lower |
| Win Rate | Higher | Lower |
| % Return Potential | Lower | Higher |
| Risk | Moderate | High (can lose 100%) |
| Delta | High (0.60-0.95) | Low (0.05-0.40) |
Common Mistakes
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Avoiding ITM because they’re “expensive” – They’re expensive for good reason.
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Not considering total capital – ITM needs more capital but less risk.
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Ignoring assignment risk – ITM options near expiry may be exercised early.
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Forgetting time value still decays – ITM options still have some theta decay.
How JournalPlus Tracks ITM
JournalPlus logs moneyness at entry, helping you analyze whether ITM or OTM strategies work better for your trading style and market conditions.
