value, as the option is 15.00 USD ITM.
Figure 8: „Moneyness“ #2
If I have a short call at 60 USD, the option would be "out of the money" (OTM). For a stock of 50 USD, the 60 USD call would have no real (intrinsic) value at expiration. The call holder can buy shares in the market at a lower price than the call contract offers. As long as the stock price at the end of my short call option is below USD 60, I would keep the premium as a profit.
When we sell options, we generally sell ATM or OTM options. Selling ITM options can be misleading as they have a higher price, but most of this value is an intrinsic value. This value will not change without the stock price changing. If I sell a call at a price of 10 USD for a total of 11 USD, in reality I can only earn 1 USD through the trade if the stock price stays exactly where it is until expiration. This is because the option initially had a value of 10 USD and the stock price would have to go down for the option value to go down.
Remember:
ITM OTM ATM are terms that describe the exercise price of the option contract compared to the current share price.
ITM options have an intrinsic value at expiration.
OTM options have only extrinsic value.
ATM options are strikes that come closest to the current share price.
As option sellers we want our options to be OTM at expiration, as option buyers we want them to be ITM.
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