UK Accounting Glossary
A deep in the money option is one that is presently very profitable. An option is commonly said to be deep in the money when the exercise (strike) price of the option is extremely favorable relative to the current market price of the underlying security. The more profitable the position, the further deep in the money the option is said to be. When the option is close to expiration, it is said to be deep in the money when the spread between the strike price and the current underlying asset’s market price is sufficiently great that the chance the deep in the money option will no longer be in the money at expiration is very low. Deep in the money options tend to stay in the money, if not deep in the money. A call option is deep in the money when the strike price is well below the current market price of the underlying asset. A put option is deep in the money when the strike price is well above the current market price of the underlying asset.
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This glossary post was last updated: 7th February 2020.