In the Money Option

An in the money option is a derivative contract that possesses positive intrinsic value because the strike price is favorable relative to the current market price of the underlying asset. For a call option, this means the current market price is higher than the strike price.

For a put option, it means the current market price is lower than the strike price. These options are exercised by holders because they allow for the purchase or sale of an asset at a price better than the current market rate.

The premium of an in the money option consists of both its intrinsic value and any remaining time value. As the expiration date approaches, the time value diminishes, leaving only the intrinsic value.

These options are highly sensitive to price movements of the underlying asset. They are preferred by traders who have a strong directional conviction.