In the Money
An option is described as being in the money when the price of the underlying instrument is above the strike or exercise price for a call option and below the strike price for a put option. For example, the shares of Company A are trading at $2.20 each. A trader decides to write a call option on the shares giving the buyer the right to buy the shares of Company A at $2.40 each. The exercise or strike price for the option is $2.40. If the price of the underlying shares rises to $2.50 then the option is in the money and the holder will exercise the option because the strike price is below the market price of the shares. The more an option is in the money the more expensive it becomes. Options are described as being deep in the money when they are likely to expire in the money.
See also: Out of the Money, At the Money