2007-03-04 00:45:54 · 5 answers · asked by Anonymous in Business & Finance ➔ Investing
In the money means the stock price is moving beyond the strike price. It means that if you bought the options it is worth more but depends how much deep in the money it is. See my earlier example. Suppose if it is say 180 Sept IBM at 4 meaning IBM stock with market price of 180 expiring in september has a call price of 4, and if the price is 182 it is in the money. If it is only 179 it is out of the money. Now, if it is only 182 it is though in the money is not more than the price for which you bought. You gain only 2 for your 4. If it reaches 184 then it is 4 for your 4 and you break even with your call buy. If it reaches 185 it is 5 for your 4 and you make 1.
2007-03-04 04:37:56 · answer #1 · answered by Mathew C 5 · 0⤊ 0⤋
No. Here are two definitions from options experts.
1. a term describing any option that has intrinsic value. A call option is in-the-money if the underlying security is higher than the striking price of the call. A put option is in-the-money if the security is below the striking price.
Options as a Strategic Investment by Lawrence G. McMillan
2. A call (put) option whose exercise price is lower (higher) than the current price of the underlying contract.
Option Volatility & Pricing by Sheldon Natenberg.
It usually does not make sense to exercise an in-the-money option as long as there is any extrinsic value (time premium) remaining in the option price. The only exception is a call option when the ex-date for a dividend is approaching and the dividend is greater than the extrinsic value of the option.
The price you paid for an option is not a factor.
2007-03-04 10:27:06 · answer #2 · answered by zman492 7 · 0⤊ 0⤋
No, "in the money" means that it makes sense for the holder of the option to exercise it. How much you paid/received for the option is not a factor in determining whether the option is "in the money".
For example, for a call option, if the strike price is $50, then the option is "in the money" if the price of the stock is higher than $50 because the holder of the option could exercise it and buy the stock from the option seller for $50, which is cheaper than if they bought it in the open market.
For a put option, if the strike price is $50, then the option is "in the money" if the price of the stock is LOWER than $50 because the holder of the option could exercise it and sell the stock to the option seller for $50, which is more than they could get if they sold it in the open market.
2007-03-04 08:52:28 · answer #3 · answered by Dave W 6 · 0⤊ 0⤋
Options are said to be "in the money" when they have exercisable value. This occurs when the current price of a stock is above its strike price (call option) or below the strike price (put option).
Example B 1 xyz May 20 Call @ 2
When the stock is trading above 20 that option is in the money. When the stock is trading below 20 the option is out o the money. To get above your break even point the stock must be trading above 22 Strike + Premium = Break Even Point
2007-03-04 10:29:37 · answer #4 · answered by Thomas Z 2 · 0⤊ 0⤋
The short answer is... YES. It's any situation in which an investor will receive a profit from the sale or purchase of a financial instrument. This results when the investor holds a contract to buy a stock at a price less than its market value, or holds a contract to sell a stock at a price greater than its market value.
2007-03-04 08:55:34 · answer #5 · answered by chimneygod 3 · 0⤊ 0⤋