Deep in the money

Deep in the money

A call option with an exercise price substantially below the underlying stock's market price. Also put option with an exercise price substantially above the underlying stock's market price. Often substantially below is defined as more than one strike price below (for calls)/above (for puts) the current value of the underlying security.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Deep in the Money

1. A call option with a strike price less than half the value of the underlying asset.

2. A put option with a strike price more than double the value of the underlying asset.

In both these situations, the option contract has intrinsic value. It is unlikely that the option will be out of the money by the time the option is exercised.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
References in periodicals archive ?
It would be hard to argue that a 25% or more discount from the current market value was not deep in the money.
According to the IRS, a call option is deep in the money if the strike price falls below the "lowest qualified benchmark." This is usually the highest strike price available on the options market that is less than the current price of the underlying stock; see Sec.
Thus, the existence of these "flexible-term equity options" could cause almost all below-market calls to be deep in the money. If a flexible-term equity option were available at 104 5/8 (1/5 below market), the call referred to at 100 would be deemed to be deep in the money--at least according to the straddle rules.