An option contract whose strike price is better than the market price of its underlying asset is said to be in the money (ITM). In this sense, a call option is in the money when market price of its underlying asset exceeds the strike price, while a put option is in the money when market price of its underlying asset is lower than the strike price.
An option contract where the strike price is worse than the market price of its underlying asset is said to be out of the money (OTM). Therefore, a call option is out of the money when market price of its underlying asset is lower than the strike price, while a put option is out of the money when market price of its underlying asset is higher than the strike price.
When the strike price and market price of the underlying asset of an option are equal, the option is at the money, and when strike price is very close to the market price of the underlying asset, it is said to be near the money or close to the money.
The relationship between strike price of an option and market price of the underlying asset can be summarized as in the following table:
| Market scenario | Call option | Put option |
| Market price > strike price | in the money | out of the money |
| Market price < strike price | out of the money | in the money |
| Market price= strike price | at the money | at the money |
| Market price≈ strike price | near the money | near the money |
