An In-the-Money option has a strike price which, for Calls, is below the present market price and, for Puts, is above the current market price.
If an option strike is ITM that option has what I call inherent value. So for a call (the right to buy), the strike is ITM if the call has intrinsic/inherent value. Since a call is a right to buy, it has inherent value if you can use that call (exercise it) to buy the stock for less than the market price. In the case of a put (the right to sell), it has inherent value if you can use that put to sell stock at more than the market price.
An Out-of-the-Money option has a strike which, for Calls, is above the present market price and, for Puts, is below the current market price.It has only Time Value, and no intrinsic value.Out-of-the-money options have zero intrinsic value. Their entire premium is composed of only time value. Out-of-the-money options are cheaper than in-the-money options as they possess greater likelihood of expiring worthless.
An At-the-Money option has a strike whether Call or Put which is equal to or near equal to the present price of the underlying.An at-the-money option is a call or put option that has a strike price that is equal to the market price of the underlying asset. Like OTM options, ATM options possess no intrinsic value and contain only time value which is greatly influenced by the volatility of the underlying security and the passage of time.