1
In-the-money
A call is ITM when stock is above strike. A put is ITM when stock is below strike.
Lesson · Options Trading
Moneyness
Classify calls and puts as in-the-money, at-the-money, or out-of-the-money and calculate intrinsic value without confusing moneyness with position profit.
Synthetic educational examples
Core concepts
Stock versus strike, and nothing else, decides moneyness.
2
At-the-money
Strictly, a strike equal to the stock price, so it has no intrinsic value. A chain calls the nearest listed strike “ATM” by convention, and that strike can be a little in or out of the money.
3
Out-of-the-money
OTM options have no intrinsic value, though they can still have extrinsic value before expiration.
Interactive lesson
Move the stock and watch each strike’s status and intrinsic value change; click a strike to inspect it.
| Strike | Call status | Call intrinsic | Put status | Put intrinsic |
|---|
Click a strike to inspect it. Moneyness describes the relationship between strike and underlying price—not whether the trade is profitable.
Classify moneyness
Use only the underlying price and strike for this classification.
1
Read the underlying price
Use the current price of the security tied to the option.
2
Read the strike
Do not use the option premium as the strike.
3
Apply the call or put rule
Calls compare stock above strike; puts compare stock below strike.
4
Calculate intrinsic value
Use the appropriate max formula and never allow intrinsic value below zero.
Moneyness classification
Score 0 / 0Choose the best answer.
Lesson rule
Change the inputs, calculate the result, and explain the risk before selecting a contract.
Common mistakes
1
Reading a chain’s “ATM” label as zero intrinsic valueOn a chain, ATM names the nearest listed strike. With the stock at $102 that strike is the 100, and its call is $2.00 in the money.
2
Using premium to classify moneynessPremium affects profit and value but not the ITM/OTM relationship.
3
Assuming OTM means worthless immediatelyBefore expiration, an OTM option may retain extrinsic value.
Completion standard
✓
Finish when you can classify any call or put as in, at or out of the money from stock and strike, compute its intrinsic value, and say why in-the-money is not the same as profitable.
The drill includes the strike a chain calls “ATM” by convention; you should be able to say what intrinsic value it actually carries.
Model scope: Theoretical values use a simplified European Black–Scholes model with a fixed 4.5% annual rate and no dividend input, so a number here can be reproduced in any calculator that takes those inputs. Listed products, early exercise, dividends, spreads, fees, and market conditions can produce different prices and outcomes.