The term in-the-money refers to an option that has positive intrinsic value. The concept of moneyness helps an investor to understand the position of an underlying asset relative to an option's strike price.
When an investor holds an option they are provided with the right, but not an obligation, to buy or sell the underlying asset at the strike price on or before the contract's expiration date. In the case of a call option, the holder has the right to buy the underlying asset, while a put option confers the right to sell the underlying.
An option that is in-the-money (ITM) will usually trade at a premium that accounts not only for the time value of the option itself, since it can it increase in value over time, but also the fact that if the option were exercised, the holder would make a profit on the transaction. When discussing standard options, there are two scenarios in which the contract would be in-the-money: