in the money


(finance) when a financial derivative has intrinsic value to the person who holds it. there are two examples:

– when the strike price of a call option is less than the spot price of the underlying stock, it is worthwhile to exercise it;

– when the strike price of a put option is more than the spot price of the underlying stock, it is worthwhile to exercise it.

please remember that an option being “in the money” does not mean it was a good investment. you might have bought the option when the difference between the strike price and the spot price was more than it is now. if it’s expiring, you might as well exercise it because to not do so is just throwing money away. but it still could have been a loss for the investor.
phil: sweet! my call options are back in the money. now i’d better exercise them.

miguel: you must be rolling in the cash, holmes!

phil: not even close. the forex rate for the uk pound nosedived and i got hosed pretty bad. it’s not where it was when i bought these rat droppings, but i need to get out before they expire.

miguel: you know, when you first told me about options they sounded like a sweet deal, but…

phil: yeah… the guy who wrote the option always seems to know what’s going down better than us dilettantes.

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