By Sahana Shruti Tolanur Srushti N J Shree Santosh

Types of options Call Option

Put Option

Moneyness refers to whether an option is in-the-money or out-the-money.

If immediate exercise of the option would generate a positive payoff, it is in the money. If immediate exercise would result in a loss (negative payoff), it is out of the money. When the current asset price equals the exercise price, meaning exercise will generate neither a gain nor loss, the option is at the money

Call is in the money when the stock price is higher than the strike price.

Why? Go back to rights ,we have the right to buy the stock at lower strike price.

Stock price of XYZ is $50.35

Strike price is $40

Put is in the money when the stock price Is lower than the strike price Stock Price of XYZ $30

Why? Go back to rights ,we have the right to sell the stock at higher strike price Strike Price $40

Call is out of the money Why? Go back to rights, when the stock price is we have the right to buy lower than the strike price. the stock at the higher strike price. Stock Price of XYZ $30 Strike Price $40

Put is out of the money Why? Go back to our when the stock price is rights, we have the higher than the strike price Right to sell the stock at lower strike price Stock price of XYZ $50 Strike Price of $40

Call or Put is at the money Why? Go back to our rights, when the stock price is we have the right to buy or equal to the strike price sell the stock at same price Stock Price of XYZ $40 Strike Price $40

The following describes the conditions for a call option: In the money call option: S X > 0 Out of the money call option: S X < 0 At the money call option: S = X

The following describes the conditions for a put option: In the money put option: X S > 0 Out of the money put option: X S < 0 At the money call option: S = X