An option is in the money when the relationship between its strike and the relevant underlying price gives it positive intrinsic value. For an ordinary call, the underlying price is above the strike; for an ordinary put, it is below the strike. The classification is the same whether someone bought or sold that option.
Intrinsic value does not equal net profit
Consider a hypothetical put with a 120 USD strike and a 110 USD expiry reference price. Its intrinsic value is 10 USD per underlying unit. A buyer who paid 12 USD per unit nevertheless loses 2 USD per unit at expiry before other costs. Contract multipliers scale the total payment and result.
ITM therefore describes the contract's price relationship, not the holder's cost basis, return or overall portfolio outcome. Moving deeper into the money increases intrinsic value, but a change in time value or volatility can also affect the option's market price before expiry.
Exercise still follows the contract
Being ITM today does not guarantee the option will remain ITM until expiry. Nor does it establish that immediate exercise is permitted or preferable to selling the option.
Exercise style, deadlines, automatic processing and the official settlement reference determine the eventual obligations. Physical delivery and cash settlement produce different outcomes, and an ITM label alone does not specify which applies.