Recently a member asked me to explain in-the-money (ITM) and out-of-the-money (OTM). I am a bit embarrassed to say that my first thought was how hard is that. Then I remembered that I struggled with it when I was a new member learning about options. There is a great deal to know about options. ITM and OTM are pretty important concepts to know and understand if you want to make money with options. However they are not part of normal conversation so they are just a couple of the many ideas you will need to learn. I have to say it was hard to learn, but it is also very profitable to learn.
I’ve read some definitions of ITM and OTM that just didn’t help me: A call is ITM when the equity price is above the strike. A put is ITM when the equity price is below the strike. Sure I can memorize that but still not understand what it means.