In the Money (ITM) is a term used in options trading that refers to an option that has the potential to result in profit if it were to be exercised immediately.
For a call option (the option to buy a security at a specific price), it is ‘in the money’ if the current market price of the security is higher than the option’s strike price. This means that the trader could buy the security at a lower price than what it’s currently worth on the market.
For a put option (the option to sell a security at a predetermined price), it is ‘in the money’ if the current market price of the security is lower than the option’s strike price. In this case, the trader could sell the security for a higher price than it’s currently worth on the market.
The term ‘in the money’ therefore refers to a profitable situation in options trading.
However, it does not guarantee profit as there are other costs involved like commissions and the price paid for the option.