Have you ever looked at options trading and felt it was too complex or only for experts? You’re not alone. Many people step back the moment they hear words like in-the-money or out-of-the-money. But here’s the truth: option moneyness is actually one of the simplest and most practical concepts in options trading—once explained the right way.
Think of option moneyness like checking whether a train ticket is useful today, later, or never. That’s exactly what moneyness tells you—whether an option has value right now or not.
In this guide, we’ll break down option moneyness, explain what is moneyness in options, explore the moneyness of options, and show how a discount broker like Firstock makes learning and trading options easier for everyday people.
No jargon. No heavy math. Just simple, practical explanations you can actually use.
Learn option moneyness, what is moneyness in options, moneyness of options & how a discount broker like Firstock helps beginners trade smarter.
Option moneyness simply tells you whether an option is profitable, break-even, or unprofitable at the current market price.
In other words, it answers one simple question:
If I exercise this option right now, will I make money?
Based on the answer, options fall into three categories:
That’s it. No mystery.
So, what is moneyness in options trading exactly?
Moneyness compares:
If the market price is favorable compared to the strike price, the option has value. If not, it doesn’t.
👉 Moneyness of options helps traders decide:
You may ask, “Can I trade options without understanding moneyness?”
Technically yes—but practically, it’s like driving with your eyes closed.
Option moneyness matters because it affects:
Smart traders always check moneyness before placing a trade.
Let’s break the three types in the simplest way possible.
Think of them as ripe, half-ripe, and raw fruit 🍎.
An option is In-The-Money when it already has intrinsic value.
Why ITM Options Are Popular
👉 Best suited for conservative traders.
ATM options are right at the sweet spot where:
They don’t have intrinsic value yet—but they’re closest to becoming ITM.
ATM options are like standing at the door—you’re just one step away from profit.
OTM options have no intrinsic value right now.
Why People Still Buy OTM Options
⚠️ But remember: High reward comes with high risk.
Let’s say:
| Strike Price | Moneyness |
| ₹90 | In-The-Money |
| ₹100 | At-The-Money |
| ₹110 | Out-Of-The-Money |
Simple, right?
Understanding this difference is crucial for correct trade selection.
Option moneyness directly impacts option premium.
Why? Because the closer an option is to profit, the more it costs.
| Moneyness | Risk Level |
| ITM | Low |
| ATM | Medium |
| OTM | High |
If you’re new, ATM options are often the safest starting point.
Many beginners:
Cheap options are tempting, but not always smart.
A discount broker like Firstock makes learning and trading easier by offering:
When costs are low, beginners can focus on learning option moneyness without pressure.
Ask yourself:
Conservative? Choose ITM
Balanced? Choose ATM
Aggressive? Choose OTM
There’s no “best”—only what suits you.
Option trading doesn’t have to be scary. Once you understand option moneyness, everything becomes clearer—from pricing to risk to strategy.
Whether you’re trading through a discount broker like Firstock or just learning the basics, moneyness of options is the foundation you must master.
Start simple. Stay patient. Learn step by step.
Option moneyness shows whether an option is profitable, break-even, or unprofitable at the current market price.
It helps traders choose the right option based on risk, price, and probability of profit.
ITM options are safer but cost more, while OTM options are cheaper but riskier.
At-The-Money (ATM) options are generally best for beginners due to balanced risk.
A discount broker like Firstock reduces trading costs and provides simple tools, making it easier to learn and trade options.
