Option Moneyness
The relationship between an option's strike price and the current market price of the underlying asset, indicating intrinsic value.
What is Option Moneyness?
Option moneyness describes the intrinsic value relationship between an option's strike price and the current price of the underlying asset. An option is in the money (ITM) when exercising it would generate a positive payoff: for a call, when the underlying price exceeds the strike; for a put, when the underlying price is below the strike. An option is at the money (ATM) when the underlying price equals or is very close to the strike price. An option is out of the money (OTM) when it has no intrinsic value — the underlying has not crossed the strike in the direction that would make exercise worthwhile. Moneyness determines the split between an option's intrinsic value and its time value, and profoundly affects its delta and sensitivity to price changes.
Example
A stock trades at $105. A call with a $100 strike is $5 in the money (intrinsic value = $5); a call with a $105 strike is at the money (intrinsic value = $0); a call with a $110 strike is $5 out of the money (intrinsic value = $0, only time value remains). A put with a $110 strike is $5 in the money; a put with a $100 strike is $5 out of the money.
Source: CFA Institute — Options Pricing