In The Money (ITM) og Out Of The Money (OTM)
Is an abbreviation used with options. ITM are options that have intrinsic value, which means that the option has a real value. In the money therefore means that the option has value in that the "strike price" is in favor of the current pricing of the underlying instrument.
Even if you have an option that is ITM, it does not mean that you will make money on the option / trade. Other things that come into play are the price of the option contract, how long is left of the option contract (expiry), broker fees, etc.
Out of the money (OTM) is the opposite of ITM. These options do not have a "strike price" that is in favor of the current pricing of the instrument. Simply explained is the "strike price" of the option above or below the current pricing of the underlying instrument. It is also the wrong way in terms of whether it is a Call or Put option.
Simply explained, therefore, an ITM option has a real / intrinsic value, while an OTM option does not have a value based on the current pricing of the instrument. The value of an option can change throughout the contract period. Things that can affect the value are; contract length, price of the underlying instrument, volatility of the underlying instrument, etc.
If you want to learn more about options, it is recommended to read the tabs for this on our pages.