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| In-the-Money Options |
An in-the-money (ITM) option is either a call option where the asset price is greater than the strike price or a put option where the asset price is less than the strike price. An ITM option is one that would lead to a positive cash flow, if it were exercised immediately.
ITM options are less popular than their out-of-the-money counterparts. In particular, they are considered as expensive, which reflects the fact that their intrinsic value, that is, the payoff that would be received if the underlying would be at its current level when the option expires, is nonzero.
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The buyer of an option that is in-the-money is expecting that the price will increase above the current spot price if it is a call or that the price will decline below the current spot price if it is a put.
