“In the money” (ITM) is a term used in finance, particularly in options trading, to describe a situation where the current market price of an underlying asset is favorable for the holder of an option contract. Specifically, it refers to the situation where the market price of the underlying asset is above (for call options) or below (for put options) the strike price of the option.

Here’s what it means for call and put options:

1. **Call Options**: A call option is in the money when the market price of the underlying asset is higher than the strike price of the option. In this situation, if the option holder were to exercise the option, they could buy the underlying asset at a price lower than its current market value. This means the option has intrinsic value.

2. **Put Options**: A put option is in the money when the market price of the underlying asset is lower than the strike price of the option. In this case, if the option holder were to exercise the option, they could sell the underlying asset at a price higher than its current market value. Like call options, in-the-money put options also have intrinsic value.

In both cases, options that are in the money typically have intrinsic value, which is the difference between the market price of the underlying asset and the strike price of the option. This intrinsic value represents the profit that the option holder would realize if they were to exercise the option immediately.

It’s important to note that the opposite of being “in the money” is being “out of the money” (OTM), where the current market price of the underlying asset is not favorable for the option holder to exercise the option. When the market price is exactly equal to the strike price, the option is said to be “at the money” (ATM).