In the Money (ITM)
An option is in-the-money when exercising it would produce a positive payoff: a call with the strike below spot, or a put with the strike above spot.
ITM options carry intrinsic value and have a delta further from zero (a deep-ITM call approaches a delta of 1.00). They cost more but track the underlying more closely.
The OCC automatically exercises options that are at least $0.01 in-the-money at expiration unless the holder instructs otherwise.
Example. With the stock at $105, a 100-strike call is $5 in-the-money and a 110-strike put is $5 in-the-money.
FAQ
What does in-the-money mean for a put?
A put is in-the-money when the stock is below the strike, giving it intrinsic value equal to strike minus spot.
Are in-the-money options automatically exercised?
Yes — the OCC exercises options $0.01 or more in-the-money at expiration by default.