When an option has immediate value because the current stock price is favorable compared to the strike price. For a call option, this means the stock price is above the strike price. For a put option, this means the stock price is below the strike price.
You own a call option with a strike price of $50, and the stock is currently trading at $55. Your option is in the money by $5 per share because you could exercise it immediately and buy at $50 to sell at $55. Similarly, a put option with a strike price of $50 would be in the money if the stock is trading at $45.
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