Key Terms in Options Trading

A CALL option is said to be in-the-money if the strike price is lower than the market price of the underlying stock. However, a PUT option is said to be in-the-money if the strike price is higher than the market price of the underlying stock.

Out-of-the-money

A CALL option is out-of-the-money if its strike price is higher than the market price of the underlying stock. A PUT option on the other hand, is out-of-the-money if its strike price is lower than the underlying stock's market price.

At-the-money

An option with a strike price that is very close to the underlying stock's market price is said to be at-the-money.