[Anonymous]

For call and put options, when you determine in-the-money and out-of-the-money for options, do you take into account the amount the option sells for? For example, if there is a stock with a strike price of $30 and sells for $2, and if the market price is $31, would it be in-the-money or out of the money?

[soxfan866]

It is my understanding that the premium has no effect on moneyness. In your example, the option would be in the money.

[Mayo]

Technically the option itself is in the money. However, your return is negative because you lost money on the trade if you execute at that point.

For practical purposes, always consider the amount paid for the option itself.

Mayo, BBA, Macc

[Anonymous]

Call : is buy option – you are expecting the price to rise to gain the profit.

Put – is sell option – you are expecting the price to fall to gain the profit

Options – either you pay premium or you don’t it depends upon the contract. That’s the only money going out or in

[Author]

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