In the money (ITM)
Principles of Finance glossary · Valuation of Bonds & Stocks
Definition
An option whose immediate exercise would yield a positive payoff.
In the money (ITM) in plain English
An option gives you the right to buy (or sell) something at a fixed price you agreed on in advance, called the strike. An option is "in the money" when using that right right now would actually make you money. Example: you hold the right to buy a stock for $50 and it's trading at $70 today, so exercising nets you $20 of real value, that's in the money. If the stock were only worth $40, no one would use a $50 buy-right (you'd just buy it cheaper on the open market), so it would be "out of the money" instead. In short, in the money means "cashing in this option today pays off."
Also called: ITM
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Practice In the money (ITM)
What is the diluted share count according to the Treasury Stock Method?
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