An option is said to be In the Money (ITM) when exercising it immediately would generate a positive payoff. For a call option, this means the underlying asset's current market price is above the option's strike price. the holder could theoretically buy at the lower strike and sell at the higher market price. For a put option, ITM means the market price is below the strike, the holder could sell at the higher strike price. ITM options carry higher premiums than out-of-the-money options because they contain intrinsic value in addition to time value. As expiry approaches, deep ITM options behave increasingly like the underlying asset itself, with a delta approaching 1 for calls and -1 for puts.
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