In-the-money option

In-the-money option

An option that has intrinsic value. For a call option, the underlying asset price exceeds the exercise price of the option (hence, if the option is immediately exercised, it has value).
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

In-the-Money

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

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

In both these situations, the option contract has intrinsic value. If an option is deep in the money, 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
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If a stock transaction would have created a constructive sale, the in-the-money option will also create a constructive sale.
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The problem with this approach is that standard option models assume efficient exercise (i.e., upon expiration, an in-the-money option will be fully exercised and an out-of-the-money option will not be exercised at all).
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The extra $5 million received then goes to the investment banker to settle the in-the-money option that the corporation had previously been short.
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Pursuant to the agreement, Liberty common shareholders will receive USD42.00 in cash for each share of Liberty common stock they hold and option holders will receive cash equal to the difference between USD42.00 per share and the exercise price of their in-the-money options.
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Liberty option holders will also receive cash equal to the difference between USD42.00 per share and the exercise price of their in-the-money options. The transaction has been valued at USD103.7m.
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