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In the money means the selling price of the item is either above (if you're working with a call) or below (if you're working with a put) the strike price in the contract. An option that is in the money can be exercised.

An uncovered, or naked, option is one where the person who will have to come up with the item if the option is exercised doesn't own it. Naked calls have to be hedged with other calls: you sell a naked call at, say, $45 then buy a call yourself at $45. Naked puts have very low risk--all you're really risking is your premium. A put exercises if the strike price is above the current spot price, so if the put goes in the money at least enough to cover the premium, you exercise, collect the money from the transaction then use that money to buy the stock. If it expires worthless, you're just out your premium.

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