In the money / out of the money.

In plain English

A call option is in the money when the stock trades above the strike price, and out of the money when it trades below. A put is the reverse: in the money when the stock is below the strike. At the money means the two are roughly equal. Being in the money means the contract has intrinsic value, not that the position is profitable, since the premium paid still has to be recovered. At expiration, in-the-money contracts are generally exercised automatically under broker procedures, while out-of-the-money contracts expire worthless.

01Why it matters

These labels decide what happens automatically at expiration, and a holder who does not know which side of the strike they are on can end up with shares or an assignment they did not plan for.

02The math, step by step

A $50 call with the stock at $54 is in the money by $4. A $50 put with the stock at $54 is out of the money and would expire worthless. Move the stock to $46 and the two flip positions exactly.

Illustrative example. The amounts here are hypothetical, chosen to show how the math works, not real quoted rates or figures.

03What this is NOT

04Receipts

Every figure on this page is sourced to a primary document. Tap to open the original.