Options trading uses several related phrases that are unique to options markets. Some commonly used, but often misunderstood options phrases are :
In the Money
An options contract is in the money if it is in profit regardless of its direction. For example, a Call contract is in the money if the price of the underlying security is higher than the options contract's strike price. Conversely, a Put contract is in the money if the price of the underlying security is lower than the options contract's strike price.
Out of the Money
An options contract is out of the money if it is in a loss regardless of its direction. For example, a Call contract is out of the money if the price of the underlying security is lower than the options contract's strike price. Conversely, a Put contract is out of the money if the price of the underlying security is higher than the options contract's strike price.
