In The Money (ITM)

1. Definition

ITM refers to an option contract that has intrinsic value. If you exercised this option right now, you would make a profit on the difference between the stock price and strike price.

2. Key Characteristics

1. Intrinsic Value: It has real, tangible value built into the price. It is not just "hope" (time value).
2. Higher Cost: Because it already has value, ITM options command the highest premiums.
3. Safety: They are less likely to expire worthless compared to OTM options.

3. Investment Logic (Delta)

• Delta: High (approaching 1.0).
• Movement: ITM options move almost dollar-for-dollar with the underlying stock price.
• Usage: Traders buy ITM options when they want a substitute for buying the stock itself, offering similar exposure with less capital outlay than buying shares.