Moneyness

Options are grouped into three categories of moneyness. An option is in the money if exercising it now would be profitable, at the money if the strike price equals or is very close to the current price, and out of the money if exercising it now would not be profitable.

For a call option, it is in the money when the underlying price is above the strike, and out of the money when it is below. For a put option, it is the reverse: in the money when the underlying price is below the strike.

For example, with a share trading at 100, a call with a strike of 90 is in the money, a call with a strike of 100 is at the money and a call with a strike of 110 is out of the money. For puts on the same share, the 110 strike is in the money and the 90 strike is out of the money.

Moneyness affects an option's price and behaviour. In-the-money options are more expensive and move more closely with the underlying asset. Out-of-the-money options are cheaper but more likely to expire worthless. Traders choose moneyness based on their goals and risk appetite.