in the money

The situation in which an option has value because of the relationship between the option's strike price and the current market price for the underlying instrument, the spot price. A call option is in the money when the strike price is below the spot price. A put option is in the money when the strike price is above the spot price. American Banker Glossary

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Options and covered warrants have a 'positive intrinsic value'. In a call option / warrant, the underlying asset price exceeds the exercise price. In a put option / warrant, the underlying asset price is less than the exercise price. For a Call covered warrant, this is where the strike price is less than the price of the underlying. For a Put covered warrant, this is where the strike price is greater than the price of the underlying. London Stock Exchange Glossary

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A warrant with an exercise price below (for a call warrant) or above (for a put warrant) the price of the underlying security. NYSE Euronext Glossary

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   An option is described as being in the money when the current price of the underlying instrument is above the strike or exercise price for a call, and below the strike price for a put. For example, the shares of Company A are trading at £2.20 each. A trader decides to write an option on the shares, giving the buyer the right to buy the shares of Company A at £2.40 each. That is a call option, because the buyer has the right to 'call' or buy the shares at £2.40 each. The exercise, or 'strike' price, for the option is £2.40. If the price of the underlying shares rises to £2.50 then the option is 'in the money' and the holder will exercise the option because the strike price is below the market price of the shares. A put option is when a trader writes an option giving the buyer the right to sell the shares to him at a given price. The buyer has the right to sell or 'put' the shares to the option writer. If the strike price of the option is £2.20 and the price of the underlying shares falls to £2.00 in the open marketplace then the put option is 'in the money' or valuable because the holder can make more money by exercising the option and selling at £2.20 then he can by selling in the market at £2.00. In both examples the buyer of the options has to make allowance for the cost of the options themselves before calculating whether it is worthwhile to exercise them. Options can also be described as being deep in the money when they are likely to expire in the money.

   ► See also Out of the Money, At the Money.

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in the money

► FINANCE options are in the money when they could be used to buy or sell shares for a profit: »

In traditional stock option plans, unless options are in the money, they are not exercised.

► INFORMAL having a lot of money: »

It's not just the oil companies that are in the money: high oil prices boost government revenue.

Main Entry: ↑money