ITM, OTM, and ATM

ITM (in-the-money), OTM (out-of-the-money), and ATM (at-the-money) describe where a stock's current price sits relative to an option's strike price. A call option is ITM when the stock trades above the strike, and OTM when it trades below the strike; a put option is the reverse — ITM when the stock trades below the strike, OTM when it trades above. ATM describes a strike sitting at (or very close to) the current stock price. An ITM option has real intrinsic value; an OTM option has none, meaning its entire premium is time value. These labels aren't fixed — an option's status can shift between ITM, OTM, and ATM as the stock price moves, right up until expiration locks in the final outcome. Being ITM doesn't automatically mean a trade is profitable overall; it only describes the option's value relative to the strike, not relative to what was originally paid for it.