Explain the concepts of In the money, At the money, and Out of the money call and put options with examples.

Question

Accepted Answer

In the money, At the money and out of the money call and put option explained with examples.

In the money call option: Strike price is lower than the current market price. Example: Stock ABC is trading at $50, call option with a strike price of $40 is in the money.
Out of the money call option: Strike price is higher than the current market price. Example: Stock ABC is trading at $50, call option with a strike price of $60 is out of the money.
At the money call option: Strike price is equal to the current market price. Example: Stock ABC is trading at $50, call option with a strike price of $50 is at the money.
In the money put option: Strike price is higher than the current market price. Example: Stock ABC is trading at $50, put option with a strike price of $60 is in the money.
Out of the money put option: Strike price is lower than the current market price. Example: Stock ABC is trading at $50, put option with a strike price of $40 is out of the money.
At the money put option: Strike price is equal to the current market price. Example: Stock ABC is trading at $50, put option with a strike price of $50 is at the money.

Accepted Answer

An in-the-money call option is described as a call option whose strike price is less than the spot price of the underlying asset.

In the Nifty example below, an in-the-money call option would be any strike price below ₹8300 (spot price) of the stock.
An out-of-the-money call option is described as a call option whose strike price is greater than the spot price of the underlying asset (ie strike price > spot price). Thus, an out-of-the-money call option includes time value/extrinsic value

Accepted Answer

In the money, At the money and out of the money call and put option explained with examples.

In the money call option: Strike price is lower than the current market price. Example: Stock ABC is trading at $50, call option with a strike price of $40 is in the money.

Accepted Answer

Example

Currently nifty trade on 18450

So in that case for Call side

18400is In the money option, 18450is at the money option, 18500is out of the money option.

And for PUT option

18500is In the money option, 18450is at the money option and 18400is out of the money option.

Asked in SBI Securities

Explain the concepts of In the money, At the money, and Out of the money call and put options with examples.

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