Every call option can be described as in the money (ITM), at the money (ATM) or out of the money (OTM). These labels compare the strike price with the current underlying price. They do not, by themselves, tell you whether the trade is profitable.
A simple comparison
Assume a stock trades at $100.
| Call strike | Moneyness | Intrinsic value |
|---|---|---|
| $95 | ITM | $5 |
| $100 | ATM | $0 |
| $105 | OTM | $0 |
In-the-money calls
An ITM call has intrinsic value. It normally costs more than an ATM or OTM call with the same expiration, and typically has a higher delta. It can behave more like the stock, but the total premium remains at risk.
At-the-money calls
An ATM call’s strike is close to the stock price. Its premium is generally all time value, and it is often highly sensitive to changes in time and implied volatility.
Out-of-the-money calls
An OTM call has no intrinsic value. It is often cheaper, but the stock must rise above the strike before expiration for intrinsic value to appear. It must rise further—above strike plus premium—for a net expiration profit.
Moneyness is not profitability
If a $95 call costs $8 while the stock is $100, it has $5 intrinsic value and $3 time value. Its expiration breakeven is $103. The call is already ITM, but the overall trade is not profitable at expiration until the stock exceeds $103.
Use the complete long call profit-and-loss calculation rather than moneyness alone.
Which should you choose?
ITM calls generally provide higher delta at a higher dollar cost. ATM calls balance sensitivity and premium. OTM calls offer lower entry cost but require a larger move and carry a higher chance of expiring worthless. Match the choice to your target, time horizon, liquidity and maximum acceptable loss.
Our strike-selection guide shows a repeatable comparison process.
Frequently asked questions
Can an OTM call become ITM?
Yes. If the underlying rises above the strike before or at expiration, the call becomes ITM.
Does ITM mean profitable?
No. The premium paid must also be recovered.
Continue the series
Next, learn how intrinsic and time value form the premium, then study bid and ask prices. For structured lessons, start the free Level 1 course.
Options involve risk. Educational content only; not investment advice.