What is In The Money in Binary Options Trading? Explanation


In the Money (ITM) refers to a binary options trading scenario where the strike price of an asset exceeds its current market value, indicating the asset holds intrinsic value.

When it comes to In the Money and Out of The Money, none of these options are better than each other. It’s because both of them has their pros and cons 

In the Money (ITM) in a nutshell

  • In the Money (ITM) occurs when an asset’s strike price surpasses its market value, holding intrinsic value in Binary Options trading.
  • Call option in ITM lets you buy stock if market price exceeds strike price.
  • Put option in ITM allows selling stock before expiry if strike price exceeds market price.

What is a Call Option “In the Money”?

A call option in the “In the Money” situation means you can buy the stock. A trader can opt for the call option when the current market price of a commodity is higher than its strike price

What is a Put Option “In the Money”?

On the other hand, a put option in the “In the Money” situation means you can sell the stock before the expiry time. To opt for the put option, the strike price of a given commodity must be above the market price. 

Example: What does “In the Money” look like in trading?

To understand what “In the Money” looks like in trading, let’s consider an example of a binary options trade on Pocket Option using silver as the asset. Currently, the price of silver stands at $19.1398. You decide to invest $100 in a binary option with a 5-minute expiry time and a payout rate of 82%.

“In the Money” Scenario

You predict that the price of silver will rise within the next 5 minutes and place a “Call” option. As the expiry time approaches, the price of silver indeed increases, surpassing the initial price of $19.1398.

At the trade’s expiration, your prediction is correct and the price of silver has risen, making your binary option “In the Money.” Consequently, you receive a payout based on the predetermined rate of 82%. In this scenario, your $100 investment yields a profit of $82 (82% of $100), resulting in a total return of $182.

“Out of the Money” Scenario

Now, let’s consider the opposite scenario. You anticipate that the price of silver will rise within the next 5 minutes and place a “Call” option. However, as the expiry time approaches, the price of silver declines, remaining below the initial price of $19.1398.

At the trade’s expiration, your prediction is incorrect, and the price of silver has fallen, rendering your binary option “Out of the Money.” Consequently, you do not receive any payout, and your $100 investment is lost.

Similarly, if you have opted for the put option and the current value decreases, you will profit. And if it increases, you will lose. 

Why is it important to know about “In the Money”?

Options trading comes with a higher possibility of earning more profit – so, with the right knowledge of the “In the Money” situation, you can easily choose the “put” or “call” option and can make a profit. 

Read other important articles in the binary glossary.

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About the author

Marc Van Sittert
Marc Van Sittert is an experienced Binary Options Trader and coach who is originally from South Africa. He started his career in 2014 by trading old-school Binary Options online. His main focus is on short-term contracts with 60-second trades.

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