In the Money vs Out of the Money - Option Moneyness Explained
Reviewed by Leon Moyer - Published October 9, 2026 - Last reviewed October 9, 2026
In this lesson
Classify any call or put as in, at or out of the money, work out its intrinsic value, and explain why being in the money is not the same as being profitable.
For standard, unadjusted stock options, an option is in the money when exercising it right now would be worth something, out of the money when it would not, and at the money when the stock price is at or very near the strike. A call is in the money when the stock is above the strike, and a put is in the money when the stock is below it. Where an option sits on this scale is called its moneyness.
Out of the money means no intrinsic value now; the option can still have a premium before expiration because time remains.
Call Options Explained and Put Options Explained introduced these terms in a sentence each. This lesson works through them properly, because moneyness shapes an option's price, how it behaves and what happens to it at expiration.
What does in the money mean in options?
The test compares stock and strike prices, without subtracting the premium. Having intrinsic value does not mean early exercise is the best choice: selling the option can preserve remaining time value.
- A call gives the right to buy at the strike. That is worth using only when the stock trades above the strike, so a call is in the money when the stock price is above its strike and out of the money when it is below.
- A put gives the right to sell at the strike. That is worth using only when the stock trades below the strike, so a put is in the money when the stock price is below its strike and out of the money when it is above.
- An option is at the money when the stock price equals the strike. In practice, traders use the term for the strike closest to the stock price.
Which side of the strike is in the money
The amount by which an option is in the money is its intrinsic value. In one sentence each: a call's intrinsic value is the stock price minus the strike, and a put's is the strike minus the stock price, never less than zero. At-the-money and out-of-the-money options have no intrinsic value; their whole premium is time value.
The Options Industry Council's pricing primer explains intrinsic and time value for calls and puts.
How does moneyness differ for calls and puts?
The same stock price can put a call in the money and a put out of the money at the same strike. With XYZ at $50:
Traders add a word for degree. An option far into the money, such as a 30 call with the stock at $50, is deep in the money. One far out, such as a 70 call, is deep out of the money. There is no exact cutoff for "deep"; it is a description, not a rule.
Intrinsic value with XYZ at $50
Calls: intrinsic value per contract
Puts: intrinsic value per contract
Moneyness is not fixed. It changes every time the stock price moves, so an option bought out of the money can move into the money and back again many times before it expires.
Is in the money the same as profitable?
No, and this is the most common moneyness mistake. Moneyness compares the stock price with the strike. Profit compares the option's value with the premium you paid. The two only line up at a break-even that includes the premium.
Worked example
In the money, and still losing money
All results below exclude fees and subsequent stock-position gains or losses. XYZ trades at $50. You buy one XYZ 50 call at the $1.86 ask from What Is an Option Premium?, paying $186.
At expiration, XYZ is at $51.
- Moneyness: the call is in the money by $1, because $51 is above the $50 strike.
- Value: $1.00 x 100 = $100.
- Result: $100 - $186 = -$86. The call is in the money and the trade still lost money.
- Break-even: $50 + $1.86 = $51.86. Only above that price does being in the money also mean a profit.
The same holds for puts. A 55 put bought for $5.13 with XYZ at $50 starts out $5 in the money, yet at expiration it profits only if XYZ finishes below $55 - $5.13 = $49.87.
Illustrative and hypothetical. The ticker and prices are invented for teaching, and the figures exclude commissions, fees, margin interest and taxes, which reduce real results. Past or hypothetical outcomes do not indicate future results.
The same gap works in a seller's favor. A trader who sold that 50 call at the $1.76 bid earns $176 on the option if it expires unexercised at or below $50, and still makes $76 at $51, even though the call they sold is in the money by $1. Buyers and Sellers covers the seller's side.
A short call you do not cover with shares has unlimited risk: its loss grows with every dollar the stock rises above the strike and can be many times the premium collected.
Why does moneyness matter?
Moneyness is the quickest way to describe an option before you know anything else about it, because it shapes four things.
- Price. In-the-money options carry intrinsic value, so they cost more. Out-of-the-money options are only time value, so they are cheaper and need a bigger move to pay off, as the strike comparison in What Is a Strike Price? showed.
- How the option moves. A deep in-the-money option moves almost dollar for dollar with the stock, while a far out-of-the-money one barely reacts to small moves. What Is Delta in Options? measures this.
- Expiration. At expiration, standard stock options at least $0.01 in the money normally enter exercise by exception, subject to contrary instructions and broker procedures. An out-of-the-money option can still be exercised on instruction. When Do Options Expire? covers the timing.
- Assignment risk for sellers. An option seller can be assigned at any time on American-style options, especially when little time value remains. For calls, risk can rise before an ex-dividend date when the dividend makes early exercise worthwhile.
See OIC's exercise FAQ for the exceptions. Adjusted contracts require comparing the whole deliverable with the aggregate exercise price, as The Contract Multiplier and Adjusted Options explains.
Check your understanding
XYZ trades at $62. Is a 60 put in, at or out of the money?
Show answer
Out of the money. A put is in the money only when the stock is below its strike, and $62 is $2 above $60.
With XYZ at $62, what is the intrinsic value of one 55 call contract?
Show answer
$700. The call is $7 in the money ($62 - $55), and $7 x 100 = $700.
You bought a 60 call for $3.00, and XYZ finishes at $62 at expiration. Is the call in the money, and did the trade make money?
Show answer
It is in the money by $2, so it is worth $200 at expiration. You paid $300, so the trade lost $100 before fees. The break-even was $63.
Key takeaways
- A call is in the money when the stock is above its strike; a put is in the money when the stock is below its strike.
- At the money means the stock is at or near the strike; out of the money means the option has no intrinsic value.
- Intrinsic value is the in-the-money amount: stock minus strike for a call, strike minus stock for a put, never below zero.
- In the money is not the same as profitable: a bought option profits at expiration only beyond the strike plus or minus the premium.
- Moneyness shapes an option's price, how it moves with the stock, what happens at expiration and a seller's assignment risk.
Common questions
What is moneyness in options?
Moneyness describes where the stock price sits against an option's strike: in the money, at the money or out of the money. It tells you whether the option has intrinsic value right now, and how much.
What does at the money mean in options?
An option is at the money when its strike equals, or is very close to, the stock price. It has little or no intrinsic value, so nearly all of its premium is time value. On a chain, the at-the-money strike is the one nearest the current stock price.
Can an in-the-money option expire without being exercised?
Yes. A contrary instruction can keep an expiring in-the-money option out of exercise by exception, and its intrinsic value is then lost to the holder. In-the-money status describes intrinsic value, not guaranteed exercise or profit. Even when exercised, the option trade can lose money if that value is below the premium paid.
Are in-the-money options automatically exercised?
Normally, expiring standard stock options at least $0.01 in the money enter exercise by exception, subject to contrary instructions from the clearing member and broker account procedures. Before expiration, an American-style holder chooses whether to exercise.