Deep in the money

An option whose strike is far in the money, so it is mostly intrinsic value and behaves almost like the stock itself.

An option is deep in the money when its strike sits far from the current price, so most of the premium is intrinsic value rather than time value. For a call, that means a strike well below where the stock trades; for a put, a strike well above. Because of that, these options behave almost like the stock itself: delta creeps toward 1.00 (or -1.00 for puts), and they barely react to changes in implied volatility.

Traders reach for deep ITM options when they want stock-like exposure while tying up less cash than buying the shares outright. Say a stock trades at 100 and you buy the 70 call: you control the upside for a fraction of the price, and time decay is small because there is little extrinsic value left to bleed away. It is a common building block for LEAPS and stock-replacement strategies.

The trap is liquidity and the bid-ask spread. Deep ITM contracts often trade thinly, so you can lose more crossing a wide spread than you save on theta. Watch early assignment too, especially on short calls around ex-dividend dates, when the extrinsic value gets thin enough that exercise makes sense for the counterparty.

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All options terms

Educational use only. Quotes are delayed ~15 minutes and nothing here is financial advice. Options trading involves substantial risk of loss.