Question

Distinguish between the "In the money" and "Out of the Money" with suitable examples.

Answer 1

A call option is said to be "in the money" if the market price is above the strike price. And put option is said to be "in the money" if the market price is below the strike price. In short we can say that in the money option is one with a strike price that has already been surpassed by the current market price and out of the money option is the one whose strike price has yet to reach which means that the option has no intrinsic value.

Example:- suppose stock ABC is trading at $50 and then the strike price $55 will be considered as an out of the money call option