In-the-Money
Categories: Derivatives, Stocks
See: Strike Price. See: Call Option. See: At-the-Money. See: Out-of-the-Money.
In-the-Money is a good thing when you're the one who owns the option. That is, when a typical option is sold. In this case, think about a call option that some guy at Goldman Sachs just brokered a deal to sell you, Bob Retailinvestor. You paid $2 for the right to buy a share of Whatever.com, trading today for $23.50; you have the right to pay $28 for Whatever.com any time between now and the third Friday of the month 2 months from now.
Well, bazoot, bazang, the company announces their quater and the stock zooms, trading now at $34 a share. Your strike price was $28, so now you're $6 in-the-money with 2 weeks left before that option expires.