InvestorQ : Can you explain in the money and Out of the Money options in India?
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Mitali Bhutta made post

Can you explain in the money and Out of the Money options in India?

Answer
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2 years ago


Any understanding of options is totally incomplete unless you understand the time value of the options. This is a very important classification when it comes to options. In-the-money (ITM) call options are those where the market price is higher than the strike price. The Out of the money (OTM) call option is one where the market price is lower than the strike price. If market price of Infosys is Rs.1000, then 980 Call Option will be ITM while 1020 Call Option will be OTM. When it comes to calls, ITM options have the highest premium but OTM options have the highest time value. The same applies to put options too.