Define that an option is in-, at-, or out-of-the-money, Financial Management

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What is meant by the terms that an option is in-, at-, or out-of-the-money?

Answer: A call or put option with S_t > E (E > S_t) is considered to as trading in-the-money. If S_t ≅ E the option is trading at-the-money. Determine if S_t < E (E < S_t) the call (put) option is trading out-of-the-money.

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