Option Moneyness

Definitions:

1. In-the-Money (ITM):
   • Call Option: ( S_T > K )
   • Put Option: ( S_T < K )
2. At-the-Money (ATM):
   • ( S_T = K )
3. Out-of-the-Money (OTM):
   • Call Option: ( S_T < K )
   • Put Option: ( S_T > K )

Example:

• For a stock trading at $50:
  • A call option with a strike price of $40 is ITM.
  • A call option with a strike price of $50 is ATM.
  • A call option with a strike price of $60 is OTM.