In the Money (ITM) Explained: Guide for Australian Investors 2026

In the Money (ITM) describes a scenario where an option contract—either a call or a put—has intrinsic value. For a call option, this means the current price of the underlying asset is higher than the option’s strike price. For a put, it’s the opposite: the asset’s price is below the strike price. Essentially, if you exercised the option right now, you’d walk away with a profit (before factoring in premiums or fees).

• Call Option ITM: Asset price > strike price

• Put Option ITM: Asset price < strike price

This isn’t just theoretical. In 2026, with ASX-listed options seeing record trading volumes, thousands of Australians are making real-world gains (or losses) based on whether their positions are ITM or not.

The landscape for retail investors has shifted. In 2026, ASIC introduced stricter transparency rules on derivatives, and the ASX upgraded its options platform, allowing for faster execution and clearer pricing data. These changes have made it easier to spot ITM opportunities—but also raised the stakes for making informed decisions.

Here’s why ITM status is more important than ever:

• Liquidity: ITM options tend to have higher trading volumes, making it easier to enter or exit positions quickly.

• Profit Potential: ITM options carry intrinsic value, so their premiums reflect real, not just speculative, worth.

• Risk Management: In volatile markets, knowing when your option is ITM can help you lock in gains or limit losses.

For example, during the 2026 mining sector rally, many Australian investors who bought call options on lithium stocks found themselves ITM as global demand surged and share prices soared above strike prices. On the other hand, those holding puts on struggling retail shares benefited as those companies’ values dipped below the strike price, placing their options squarely ITM.

Let’s look at two scenarios Australians might encounter in 2026:

• Case Study 1: Call Option on CSL Limited A retail investor buys a CSL call option with a $270 strike price. In May 2026, CSL’s share price hits $290. The option is now ITM by $20 per share, allowing the investor to exercise or sell the option at a profit (minus the premium paid).

• Case Study 2: Put Option on JB Hi-Fi Amid a tech slowdown, JB Hi-Fi’s share price drops to $38, well below the $42 strike price of a put option purchased earlier. The put is ITM by $4 per share, enabling the investor to benefit from the downturn.

Strategically, many seasoned investors use ITM options to generate income (via covered calls) or hedge portfolios against market swings. For instance, with the recent surge in green energy stocks and increased market volatility after the 2026 federal budget, ITM options have become a popular tool for both speculative plays and risk management.

Mastering ITM options requires more than just spotting the right price point. Here’s how to approach ITM trading in 2026:

• Monitor Policy Changes: Stay updated on ASIC and ASX announcements, as new margin requirements and reporting standards can affect option pricing and liquidity.

• Use Updated Tools: Take advantage of the latest brokerage platforms, which now offer real-time ITM calculators and risk analytics tailored for the Australian market.

• Factor in Premiums and Taxes: Remember that profits from ITM options are subject to CGT and brokerage fees—always calculate your net gain.

• Don’t Forget Expiry: An option can go from ITM to OTM (Out of the Money) quickly in volatile sectors like tech or resources. Know your expiry dates and have an exit strategy.

‘In the Money’ is more than just a status—it’s a signal of opportunity and risk. As Australia’s options market grows more sophisticated and regulatory oversight tightens, understanding ITM can help you capture gains, avoid missteps, and navigate the evolving landscape with confidence.