Option Moneyness
In-The-Money, Out-Of-The Money, or At-The-Money
An options contract can be ‘in-the-money’, ‘out-of-the-money’, or ‘at-the-money’.
An option contract that is ‘in-the-money’ is an option contract with a strike price that is either above or below the current trading level of the specific underlying.
For example, if stock XYZ is trading at fifty dollars a share ($50.00) and an investor owns the forty five dollar call ($45.00), that particular call option would be considered ‘in-the-money’ because the stock is already trading above the $45.00 strike price.
On the other hand, if the investor owned the fifty dollar call option ($50.00) and the stock was trading at fifty dollars ($50.00) - that particular option contract would be ‘at-the-money’ since it is at the exact same trading level that the underlying stock is currently trading at.
Finally, if the investor owned the fifty five dollar call option ($55.00) and the stock was trading at fifty dollars a share ($50.00) - the fifty five dollar call option would be ‘out-of-the-money’ since the underlying stock has not yet reached the fifty five dollar ($55.00) trading level.
