What does in, at, and out of the money mean?

“Moneyness” (in, at, and out of the money) refers to how the strike price of the option relates to the current trading price of the underlying stock or ETF (asset).

For calls, "in the money" means the strike of a call is below the current market price of the underlying asset and "out of the money" means the strike is above the current market price.

If an investor has a long call option that is in the money it means that the underlying stock is trading above the strike price. The higher the underlying stock goes above the strike price the more valuable the option position becomes (deeper in the money).

For puts, "in the money", means the strike of a put is above the current market price and "out of the money" means the strike is below the current market price.

A put option is in the money when the underlying stock is trading below the option’s strike price. The farther the stock falls below the more valuable the options position becomes (deeper in the money).

An "At the money" call or put option means the strike of the option is the same as the current market price.