A call option is in the money when the underlying asset price is higher than the strike price. A put option is in the money when the underlying asset price is lower than the strike price.

In the money is a term used to describe an option contract that has intrinsic value. This means that the current market price of the underlying asset is favorable for the holder of the options contract to exercise their right to buy or sell the asset at the strike price. For example, let’s say you buy a call option on Company XYZ with a strike price of $50, and the current market price of Company XYZ shares is $60 per share. In this case, your call option is in the money, as you have the right to buy shares of Company XYZ at $50 per share and sell them on the open market for a profit of $10 per share. On the other hand, if the current market price of Company XYZ shares is below $50, the call option would be out of the money, as it would not make sense to exercise the option to buy shares at a higher price than the current market price. Traders closely monitor whether their options are in the money or out of the money as it affects the potential profitability of the trade.