The relation between the strike price of a derivative (option) and the price of the underlying asset. That is, moneyness represents the intrinsic value of an option at a specific date within an option time to expiration. Forms of moneyness include: in the money, at the money, out of the money, etc. When an option is in the money, exercising is expected to produce a profit. A losing option signifies an out of the money position. An at-the-money option means that the holder’s gains and losses from exercising are equal (a breakeven state). In other words, options whose premium is made up only of time value are called “out-of-the-money options“, and options whose premium is based on the intrinsic value or on combination of intrinsic and time value are called “in-the-money-options“.

At expiration date, out-of-the-money options are worthless, while in-the-money options still have intrinsic value.